Mauricio Bittencourt (p), Alex Sander do Carmo, Stanley Thompson, Bruna Bittencourt

Mario Fortuna

We examine intra-industry trade between Brazil and OECD countries from 2000 to 2009. Specifically, we decomposed intra-industry bilateral trade (IIT) and identified its determinants. The USA and Mexico, respectively, were found to have the largest volume and IIT indices with Brazil. Additionally, vertical intra-industry trade (VIIT) was found to be larger than horizontal intra-industry trade (HIIT) and Brazilian export goods to be largely of lower quality than imports. Following the theoretical work of Falvey and Kierzkowski (1987), the effect of increasing bilateral differences in factor endowments on VIIT depends on the variety specialization in each good of the relatively better endowed country. Empirically, we specify and estimate a panel data econometric model to investigate the main determinants of VIIT. The results show that endowment differences (capital/labor ratio) had a positive effect on vertical intra-industry bilateral trade, corroborating the central hypothesis of Falvey and Kierzkowski.

Juan De Lucio (p), Asier Minondo, Francisco Requena, Raúl Minguez

Mauricio Bittencourt

Countries’ export specialization patterns are often caused by the behavior of
very few firms. We propose an easy-to-implement methodology to decompose
export specialization into fundamental comparative advantage (a country-specific
component) and granular comparative advantage (a firm-specific component). We
apply this methodology to analyze export specialization across countries and across
regions within a country. In the country-level analysis, we find that, on average,
granular comparative advantage leads to export specialization in 29% of industries,
which account for 47% of total exports. We also show that 60% of the variation in
export specialization across countries is explained by granular comparative advantage.
The contribution of firms to export specialization is more important across
regions within a country than across countries.

Mario Fortuna (p), Francisco Silva, João Teixeira

Juan De Lucio

The current study analyses the impact on the Azores, a small island regional economy of the Transatlantic Trade and Investment Partnership (T-TIP) between the European Union and the United States of America. A dynamic Computational General Equilibrium (CGE) model detailing six household categories, forty-five sectors, and four trading partners is used. Previous studies used aggregate variables and were largely based on the structure of the national economy. For a small, integrated economy, examination of foreign trade statistics comprises an underestimation, given that a good part, if not most, of the trade is channeled through greater national logistic centers. This limitation is overcome by contemplating the impacts of direct and indirect trade.
Relative to the business-as-usual scenario, gross domestic value is anticipated to be 0.4 to 0.77% higher by 2030. Using an equivalent variation, the estimated welfare impact is positive for all six household categories with relatively higher gains for the middle-income categories. The lowest relative impact is in the lowest and in the highest income categories. Using the change in value added, fisheries are negatively impacted, while agriculture registers ambiguous results depending on the scenario considered. Except for fish processing, the main industrial activities are not hurt. There is a positive impact on the very important dairy industry as well as in retail activities and services associated with tourism and air transportation.
The study underlines the importance of regional and even local analyses of the impact of trade agreements for better economic policies.