International Trade and Investment. (Conferences)

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Members and guests of the NBER's Program on International Trade and Investment met in Cambridge on March 15 and 16. M. Scott Taylor, NBER and University of Wisconsin, organized the meeting. The following papers were discussed:

Antoni Estevadeordal, Inter-American Development Bank; Brian Frantz, U.S. Agency for International Development; and Alan M. Taylor, NBER and University of California, Davis, "The Rise and Fall of World Trade: 1870-1939"

Yong Seok Choi, Brown University, and Pravin Krishna, NBER and Brown University, "The Factor Content of Bilateral Trade: An Empirical Test"

Peter K. Schott, NBER and Yale University, "Moving Up and Moving Out: U.S. Product Level Exports and Competition from Low Wage Countries"

Daniel Chiquiar, University of California, San Diego, and Gordon H. Hanson, NBER and University of California, San Diego, "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States"

Jose M. Campa, NBER and New York University, and Linda Goldberg, Federal Reserve Bank of New York, "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon"

Stephen R. Yeaple, University of Pennsylvania, "A Simple Model of Firm Heterogeneity, International Trade, and Wages"

Joshua Aizenman, NBER and University of California, Santa Cruz, and Nancy Marion, Dartmouth University, "The Merits of Horizontal versus Vertical EDI in the Presence of Uncertainty"

Richard E. Baldwin, NBER and Graduate Institute of International Studies, Geneva, and Frederic Robert-Nicoud, London School of Economics, "Entry and Asymmetric Lobbying: Why Governments Pick Losers" (NBER Working Paper No. 8756)

The ratio of world trade to output was a mere 2 percent in 1800, but then rose to 10 percent in 1870, to 17 percent in 1900, and to 21 percent in 1913. It then fell back to 14 percent in 1929 and to only 9 percent in 1938. The period 1870-1913 thus marks the birth of the first great era of trade globalization, and the period 1914-39 its death. What caused the trade boom and bust? The textbook interpretations offer a variety of narratives, but few precise answers. Estevadeordal, Frantz, and Taylor examine the gold standard, tariffs, and transport costs as determinants of trade. In the nineteenth century the gold standard was much more important than tariff policy, and just as important as transport costs, as a trade-creating force, In the 1920s, the slowdown in trade was driven by a rise in transport costs, although trade barriers other than tariffs might have been important. In the 1930s, the final collapse of the gold standard, persistently high transport costs, and the expansion of other barriers drove trad e volumes even lower.

The Factor Proportions model of international trade is one of the most influential theories in international economics. Choi and Krishna use OECD production and trade data to test the restrictions (derived by Helpman, 1984) on the factor content of trade flows which hold even under non-equalization of factor prices and in the absence of any assumptions regarding consumer preferences. In a further contrast with most of the existing literature, which has focused on the factor content of a country's multilateral trade, their tests concern bilateral trade flows, thereby enabling the examination of trade flows between only a subset of countries for which quality data (relatively speaking) is available. Their results provide greater support for the theory than have many previous exercises: they are unable to reject the restrictions implied by the theory for the vast majority of country-pairs.

Product cycle theory has developed countries inventing goods and developing countries copying them. Once copying takes place, developed countries abandon the market -- either outright or through vertical differentiation -- because of developing country cost advantages. Matching U. …