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India in the Global and Regional Trade - Determinants of Aggregate and Bilateral Trade Flows and Firms’ Decision to Export

  • T.N. Srinivasan

    (Indian Council for Research on International Economic Relations)

  • Vani Archana

This paper contributes to two strands of literature on empirical models of trade flows and trade policy. The first and the older strand is that of gravity models of bilateral trade flows going back to Hans Linneman (1966) and Tinbergen (1962) and its recent applications, particularly by Adams et al (2003) and De Rosa (2007) in analyzing the impact of Preferential Trade Agreements (PTAs). Our focus is on applying the gravity model to analyze Indias trade flows (exports and imports) with its trading partners around the world and to examine the impact of various PTAs in which India or its trading partner or both are members. Clearly this is of interest, since, from 1991 India is aggressively negotiating and concluding PTAs of which South Asian preferential trade (and later free trade) agreement is the most prominent. We find that India is not well served by its pursuit of PTAs and should instead push for multilateral trade liberalisation by contributing to conclusion of the Doha round of negotiations with an agreement beneficial to all WTO members. The second and the more recent strand is the analysis of trade flows using data on exports of individual firms. It is well known that in all countries of the world relatively few firms participate in world trade, thus suggesting that characteristics of a firm (such as its size and productivity) are relevant besides country level barriers on trade matter for participation in world trade. This strand is rapidly growing. Ours is one of the very few attempts at modeling and estimating the decision of Indian firms on their participation using firm level data. The paper reports on our preliminary results. We have also collected primary data from a sample survey of firms to explore this issue deeper. While these data are yet to be fully analyzed, nevertheless some preliminary descriptive tables summarizing them are included in an Appendix.

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Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22261.

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Date of creation: Jan 2009
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Handle: RePEc:eab:tradew:22261
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  1. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, vol. 63(2), pages 209-235, July.
  2. Gianmarco Ottaviano & Thierry Mayer, . "The happy few: the internationalisation of European firms," Blueprints, Bruegel, number 12, 5.
  3. 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.
  4. Aitken, B. & Hanson, G.H. & Harrison, A.E., 1994. "Spillovers, Foreign Investment and Export Behavior," Papers 95-06, Columbia - Graduate School of Business.
  5. Santos Silva, J.M.C & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers 5311, C.E.P.R. Discussion Papers.
  6. Reinhilde Veugelers & Bruno Cassiman, 2000. "Importance of international linkages for local know-how flows. Some econometric evidence from Belgium," Economics Working Papers 434, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Soloaga, Isidro & Winters, L. Alan, 1999. "Regionalism in the Nineties: What Effect on Trade?," CEPR Discussion Papers 2183, C.E.P.R. Discussion Papers.
  8. Johannes Van Biesebroeck, 2003. "Exporting Raises Productivity in Sub-Saharan African Manufacturing Plants," NBER Working Papers 10020, National Bureau of Economic Research, Inc.
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