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Research under the Chair Jacquemin
The Chaire Jacquemin research focuses on research in trade related topics where in particular the role of trade policy and its effects on firm behavior is central with a particular attention to the European Economy
More specifically attention is put on the following research questions:
Antidumping policy is one of the few trade policy instruments that countries can use in a unilateral way. Tariffs have been coming down in the past decades and are negotiated at the multi-lateral level of the WTO. Coinciding with the fall in tariffs there has been a surge in the use of antidumping measures worldwide. Since 1980, the number of countries adopting antidumping laws has more than doubled. The new users of antidumping are mostly developing countries such as India, China, Mexico. Antidumping Laws and measures offer a number of attractive features to do interesting research on trade policy. Below we list a number of recent papers dealing with this type of trade policy. Using a gravity approach this adoption wave of antidumping laws can be used to assess the effects on trade flows of this new trade policy regime. Research shows that the chilling effects of antidumping laws on bilateral trade flows are substantial. While the products protected by antidumping measures only represent about 5% of trade, antidumping protection chills over 20% of total trade. In particular trade in chemicals, iron and steel, textiles and agriculture are affected. This results in lower aggregate trade than in the absence of antidumping laws. (Vandenbussche and Zanardi, European Economic Review, 2009 forthcoming).
Antidumping protection substantially affects firm-level performance in a number of ways. Research has shown that firms that apply for protection on average have lower productivity to start with than firms that do not apply for protection. Furthermore it appears that firms protected by this type of trade policy are affected differently. Low productivity firms benefit from trade protection i.e. their average productivity increases during protection. But high productivity firms protected by antidumping actually reduce their productivity. Therefore we can say that antidumping protection is Good for Bad firms but Bad for Good firms (Vox article). Since empirically there are many more low productivity firms, the average productivity change that we find for all protected firms is positive. But when we allow for firm heterogeneity and distinguish between laggard and frontier firms, it is clear that frontier firms loose productivity. (Konings and Vandenbussche, 2008, Journal of International Economics
Interestingly, trade policy also affects exports of protected firms. Using data for French firms, research shows that protected firms that are initial exporters i.e. exporters even before the initiation of an antidumping request, experience a large drop in their intensive margin of exports once protection is imposed. To use an example, when the EU protects itself against the imports of Chinese bicycles, we find that French exports of similar bicycles by firms protected by the antidumping measures drastically falls. Moreover, this fall in exports is not compensated by an increase in domestic sales. While for non-exporters we find that antidumping protection raises their domestic sales by about 5%. This is not the case for exporters. For the latter, their domestic sales fall by about 6 to 20% depending on whether the exporting firms belongs to a global network of firms with foreign affiliates outside France. This suggests that antidumping policy interferes with firms that engage in international activities such as exporting and outsourcing. Anecdotal case evidence seems to confirm that large firms are not always in favor of getting protection. These empirical results cannot be well explained by existing theoretical models. For one, political economy models would predict that large firms have a higher probability of protection since they can exercise more lobby power. But recently the well known Princeton trade economist Gene Grossman commented in the Economist (2009) that “global sourcing has changed the political economy of protection”. Indeed our empirical results suggest that large firms tend to be exporting firms and outsourcers i.e. they belong to a global network of affiliates which makes them “global firms”. These large firms appear to lose out under antidumping trade protection and, if anything, would be lobbying against protection. Models with a representative firm would in contrast predict that import protection will spur exports of the protected firms. But our empirical results find the opposite i.e. that import protection actually lowers exports, which confirms the more general notion that trade policy appears to affect different firms differently. These results can be found in Konings and Vandenbussche, 2009, CEPR paper Other Work in Progress:
J. Konings and H. Vandenbussche (2009),"Antidumping Protection hurts Exporters. Firm-level Evidence from France This paper empirically evaluates the effects of antidumping measures on the exports of protected firms. While antidumping protection raises the domestic sales of the more “traditional” non-exporting firms on the protected market with about 5%, it negatively affects the firm-level exports of similar products as the protected ones. Export sales of protected firms fall by almost 8% compared to a relevant control group of unprotected firms. The drop in firm-level exports more than doubles for firms that are global, i.e. firms with foreign affiliates. Measured at the product-level, extra-EU exports of goods protected by antidumping fall by 36% while exports to target countries fall by as much as 66% following protection. Protection also affects the extensive margin of exporters but to a lesser extent. Initial exporters face a marginally higher probability to stop exporting during protection compared to unprotected firms. Finally, we find that the productivity of exporters falls while that of non-exporters rises during antidumping protection. We offer a number of plausible explanations for our findings arising from the heterogeneous firm literature. We also discuss the importance of our findings for policy.
H. Vandenbussche and M. Zanardi (2008),"The Global Chilling Effects of Antidumping Proliferation Advocates of antidumping (AD) laws downplay their negative effects by arguing that the trade flows that are subject to AD are small and thus their distortions negligible. But while the adverse effect of AD on product level trade has long been established, the question remains whether there are trade effects at the aggregate level. The recent proliferation wave of AD laws provides us with a unique policy change to estimate the true trade effects of adopting and enforcing AD laws. For this purpose, we estimate the effect of AD on bilateral trade flows between the “new adopters” of AD laws and their trade partners. Using a gravity model of annual observations (1980-2000) our estimates show that AD has trade depressing effects on aggregate import volumes. We find that new tough users have their aggregate imports depressed by 15 billion US$ a year (or 6.6%) as a result of AD measures. For some developing countries like India and Taiwan, the dampening effects of AD laws on trade flows are found to substantially offset the gains from trade liberalization.
S. Poncet, W. Steingress and H. Vandenbussche (2008), "Financial Constraints in China: firm-level Evidence This paper uses a unique micro-level data-set on Chinese firms to test for the existence of a "political-pecking order" in the allocation of credit. Our findings our threefold. Firstly, private Chinese firms are credit constrained while State-owned firms and foreign-owned firms in China are not; Secondly, the geographical and sectoral presence of foreign capital alleviates credit constraints faced by private Chinese firms. Thirdly, geographical and sectoral presence of state firms aggravates financial constraints for private Chinese firms. Therefore it seems that ongoing restructuring of the state-owned sector and further liberalization of foreign capital inflows in China can help to circumvent financial constraints and can boost the investment of private firms.
I. Van Beveren and H. Vandenbussche (2009),"Product and Process Innovation and the decision to Export We analyze the relationship between firm-level innovation and firms' propensity to start exporting for firms in a small open economy. We measure innovation by innovative effort (R&D) as well as by innovative output (product and process innovation). After carefully correcting for endogeneity and selection issues, the evidence points to firms self-selecting into innovation in anticipation of their entry into export market, rather than product and process innovation triggering entry into the export market. These results suggest that governments can foster firm-level innovation through trade liberalization. K. Miyagiwa, H. Song and H. Vandenbussche (2009),"Innovation, Protection and Retaliation" This paper develops a model where firms engage in process-improving R&D and countries differ in their enforcement of intellectual property rights (IPR). We aim to study firm-level innovation under unilateral and bilateral trade protection allowing for country heterogeneity in IPR enforcement. We offer a general theory on the link between trade policy and innovation. Our results are consistent with historical and other stylized facts and offer an explanation for the broad pattern of trade protection empirically observed.
J. Hartigan and H. Vandenbussche (2009),"The Proliferation of Trade Protection Laws: a theoretical explanation This paper develops a model that offers a plausible interpretation for the empirical observation of diffusion of antidumping (AD) laws amongst WTO members. Contrary to the regnant belief that this proliferation is driven mainly by retaliatory motives, our model shows that adoption and use of AD laws involve a cooperative act amongst WTO member in an infinite horizon model. The diffusion of AD laws need not result in a Prisoner's dilemma. Instead we show that the AD agreement of the WTO can serve as a risk-sharing vehicle amongst WTO members in response to adverse shocks incurred by domestic producers.
G. Mion, H. Vandenbussche and L.Zhu (2009),"Trade with China and Skill Upgrading in Manufacturing. Firm-level evidence We use Belgian Firm level data over the period 1996-2007 to analyze the impact of imports from China and other low wage countries on firm growth, exit and skill upgrading. Using firm-level imports we find Chinese imports to be more important than imports from other low wage countries. Import competition from China alone explains around 30% of total skull upgrading in Belgian manufacturing during this period. Our results also show that outsourcing to China increases relative employment of non-production workers and is beneficial to firm survival in Belgium.
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24/11/2009
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