Advanced Search
MyIDEAS: Login

Specialization and Diverging Manufacturing Structures: The Aftermath of Trade Policy Reforms in Developing Countries

Contents:

Author Info

  • Antoni Estevadeordal

    (Inter-American Development Bank)

  • Christian Volpe Martincus

    (Inter-American Development Bank)

Registered author(s):

    Abstract

    Trade barriers have been declining around the world over the last five decades. Countries reduced their tariffs unilaterally as well as concertedly in the framework of regional integration agreements. As a consequence, trade flows among economies have substantially intensified. According to economic theory, this should have had a significant impact on the countries’ specialization patterns. However, to our knowledge, there is no direct robust econometric evidence on the effect of trade policy on the overall degree of countries’ specialization. This paper aims at filling this gap in the literature. We focus on ten Latin American countries members of the LAIA (Latin American Integration Association) over the period 1985-1998. These countries are natural case studies because in the last two decades they implemented road and comprehensive trade liberalization programs, both generally and preferentially, starting from relatively high tariff protection levels. Our econometric results suggest that reducing own MFN tariffs is associated with increasing manufacturing production specialization. Furthermore, we find that preferential trade liberalization and differences in the degree of unilateral openness have resulted in increased dissimilarities in manufacturing production structures across countries. These results are robust to the specialization measure being used, the correction for groupwise heteroscedasticity, cross-sectional correlation, serial correlation and endogeneity biases, and the inclusion of indicators to account for the real exchange misalignment prevailing in the region during the period under examination.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.dagliano.unimi.it/media/WP2006_220.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 220.

    as in new window
    Length:
    Date of creation: 01 Jun 2006
    Date of revision:
    Handle: RePEc:csl:devewp:220

    Contact details of provider:
    Postal: Via Conservatorio 7 - 20122 Milano
    Phone: +39 02 503 16486
    Fax: +39 02 503 16475
    Web page: http://www.dagliano.unimi.it/
    More information through EDIRC

    Related research

    Keywords: Specialization; Trade Policy; Latin America;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
    2. Imbs, Jean & Wacziarg, Romain, 2000. "Stages of Diversification," CEPR Discussion Papers 2642, C.E.P.R. Discussion Papers.
    3. Pierre-Philippe Combes & Henry G. Overman, 2003. "The spatial distribution of economic activities in the European Union," LSE Research Online Documents on Economics 20023, London School of Economics and Political Science, LSE Library.
    4. K.H. Midelfart & H.G. Overman & S.J. Redding & A.J. Venables, 2000. "The location of European industry," European Economy - Economic Papers 142, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    5. Jeffrey A. Frankel & Andrew K. Rose, 1996. "The Endogeneity of the Optimum Currency Area Criteria," NBER Working Papers 5700, National Bureau of Economic Research, Inc.
    6. Ilan Goldfajn & Rodrigo O. ValdŽs, 1999. "The Aftermath Of Appreciations," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 229-262, February.
    7. Frederico Valladares & Cristina Terra, 2004. "Real Exchange Rate Misalignments," Econometric Society 2004 Latin American Meetings 191, Econometric Society.
    8. Luca Antonio Ricci, 1998. "Uncertainty, Flexible Exchange Rates, and Agglomeration," IMF Working Papers 98/9, International Monetary Fund.
    9. Rebelo, S. & Vegh, C.A., 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," RCER Working Papers 405, University of Rochester - Center for Economic Research (RCER).
    10. Diana Weinhold & James Rauch, 1997. "Openness, Specialization, and Productivity Growth in Less Developed Countries," NBER Working Papers 6131, National Bureau of Economic Research, Inc.
    11. Sebastian Edwards, 1994. "Macroeconomic Stabilization in Latin America: Recent Experience and Some Sequencing Issues," NBER Working Papers 4697, National Bureau of Economic Research, Inc.
    12. Redding, Stephen, 2002. "Specialization dynamics," Journal of International Economics, Elsevier, vol. 58(2), pages 299-334, December.
    13. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    14. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
    15. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
    16. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
    17. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    18. Anthony J. Venables, 2003. "Winners and losers from regional integration agreements," Economic Journal, Royal Economic Society, vol. 113(490), pages 747-761, October.
    19. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    20. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    21. Isabelle Bensidoun & Guillaume Gaulier & Deniz Ünal-Kesenci, 2001. "The Nature of Specialization Matters for Growth: an Empirical Investigation," Working Papers 2001-13, CEPII research center.
    22. John Romalis, 2004. "Factor Proportions and the Structure of Commodity Trade," American Economic Review, American Economic Association, vol. 94(1), pages 67-97, March.
    23. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    24. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
    25. Redding, Stephen, 1999. "Dynamic Comparative Advantage and the Welfare Effects of Trade," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 15-39, January.
    26. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
    27. James Harrigan, 1996. "Technology, factor supplies, and international specialization: estimating the neoclassical model," Staff Reports 15, Federal Reserve Bank of New York.
    28. André Sapir, 1996. "The effects of Europe's international market program on production and trade: a first assessment," ULB Institutional Repository 2013/8162, ULB -- Universite Libre de Bruxelles.
    29. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
    30. Balassa, Bela & Noland, Marcus, 1989. "The changing comparative advantage of Japan and the United States," Journal of the Japanese and International Economies, Elsevier, vol. 3(2), pages 174-188, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Christian Volpe Martincus & Antoni Estevadeordal, 2009. "Trade Policy and Specialization," IDB Publications 9289, Inter-American Development Bank.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:csl:devewp:220. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chiara Elli).

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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