Speaker:Chen Xiaoping, Nanyang Technological University, Singapore

Date:May 14, 2014

Time:3:30 p.m. - 4:30 p.m.

Location:Room 401, Run Run Shaw Science Building, Central Campus

Sponsor:Center for Economic Research of Shandong University

Abstract:

The Linder hypothesis states that countries with similar income level should trade more intensely with each other. Even though it has drawn much attention in economic research over the past decades, the evidences about it are still mixed. We revisit this hypothesis by incorporating production fragmentation across borders. As the modern production becomes more and more fragmented and involves many countries, intermediate goods and services are moved across borders multiple times before assembled into final goods. There is an increasing discrepancy between the gross trade volume and the value-added trade volume between countries. We build a model to show that international fragmentation will hide the Linder hypothesis in the gross trade data. However, after correcting for bilateral value-added trade, the Linder hypothesis resurfaces. Empirical test using both the gross trade and value-added trade data confirms our predictions.

For further information, please visit:

http://www.cer.sdu.edu.cn/articleshow.php?id=3018