Information, International Substitutability, and Globalization

Abstract

Improved information allows home firms to rule out more potential foreign trade partners in advance of attempting to form a match. The increased responsiveness to country wage or goods price differentials resulting from this better first cut causes the general-equilibrium elasticity of substitution between national labor forces or the Armington elasticity of substitution between domestic and imported output to increase. Further results include an increase in the elasticity of domestic labor demand, an increase in the extent to which reductions in conventional trade barriers equalize national wages, and reduced "natural protection" for domestic producers.

Globalisation as a ‘Good Times’ Phenomenon: A Search-Based Explanation

“…www.economics-ejournal.org6 in Table 1: the high turnover of trading rms (Besedes and Prusa, 2006) and the evidence of network effects (Rauch and Trindade, 2003), taken with strong evidence that clusters of low-cost producers can go unnoticed by traders for long periods (the noted example being surgical steel production in Sialkot, Pakistan 7 ). Informational barriers can generate a search process, and I argue that this process is a primary cause of threshold effects, which in turn helps explain the dynamics of trade.…”

“…The two rms are of equal size and ex ante expected ef ciency: however, productivity varies depending on the goodness of t of the match, µ i . As in Rauch and Casella (2003) or Rauch and Trindade (2003), µ; potentially follows a uniform, rectangular distribution between 0 and 1, and rms do not know µ i before entering a match i, though they know its overall distribution. 11 (See Appendix 1 for more details on the derivation.…”

“…The paper follows Rauch and Trindade (2003) and Rauch and Casella (2003) in using a matching framework based upon Salop's circular cylinder (note that Grossman and Helpman, 2002, use a similar setup). This is shown in Figure A1.…”

“…The rest of Section 1 and Section 2 build on the theoretical ideas of existing papers by Ishii and Yi (1997), Rauch and Trindade (2003) and Rauch and Casella (2003) and Helpman (2002 and2005), to develop a partial equilibrium model of a single industry with twostage production, outlining the difference between growing and declining sectors and that between matched and searching rm pairs. In Section 3, I then set up a three-phase time schema, whereby in phase 1 there is little trade, phase 2 sees globalisation and phase 3 sees an economic crisis.…”

Trade Intensity Spillover Effects on East Asian Sustainable Economic Growth

“…Then, reviewed the work of Jones and Kierzkowski [2] and Arndt and Huemer [3] have argued that a surge in intermediate goods trade could dilute real exchange rate impacts as intermediate exports involve a high proportion of imported parts and components and high fixed costs in establishing the "service links." However, Obstfeld [4] and Rauch and Trindade [5] have argued that the increasing importance of product fragmentation and of trade in parts and components could induce stronger substitution responses as the presence of production facilities in different countries would allow firms to respond more quickly to international price changes by shifting activities across borders.…”