Room to Move: Why Some Industries Drive the Trade-Specialization Nexus and Others Do Not

Jaap W.B. Bos, Maastricht University

In this paper, we investigate which industries drive the trade-specialization nexus in the European Union over the 1997-2006 period. We follow Melitz (2003), and argue that industries need 'room to move' in order for increasing trade openness to translate into increased specialization. Our paper finds that the true drivers of the trade-specialization nexus are productive firms, who benefit from the increase in trade-openness and can appropriate resources from less productive firms. This causes the industry in which they operate to expand, at the expense of other industries, in which there is no room to make such moves. We argue and find that the potential for reallocation in industries determines whether there is a trade-specialization nexus; in industries with little potential for reallocation, increased trade openness has no or a negative effect on that industry’s share of total value added. As a result, the trade-specialization nexus is driven by a small number of industries, who nevertheless have a significant impact on concentration patterns.

About the speaker
Jaap Bos (PhD 2002, Maastricht) is an economist specializing in banking and growth empirics. He is currently Associate Professor of Finance at Maastricht University. His work has been published in the Journal of Business, the European Economic Review, the Journal of Development Economics and the Journal of Banking and Finance. His research interests include the role of productivity differences, spillovers and innovation in explaining economic growth, and the analysis of micro-developments in efficiency and competition. From 2002 to 2004, while working at the Netherlands Central Bank, he was a member of the Basel II Research Task Force and co-author of the BIS background paper entitled ‘Studies on the Validation of Internal Rating Systems’. In 2005, he was a guest editor of the Journal of Banking and Finance, editing a special issue on ‘Banking and Finance in an Integrating Europe’, with Klaas Knot (Ministry of Finance) and Clemens Kool (Utrecht University). Together with Jacob Bikker (Netherlands Central Bank), he published “Bank Performance” (Routledge, 2008), a theoretical and empirical framework for the analysis of profitability, competition and efficiency. In 2009, he was a member of the research team that investigated the credit crisis for Dutch parliament as part of a parliamentary investigation. Jaap Bos is listed by IDEAS/Repec as one of its. top authors in the field of efficiency and productivity.

Venue: Conference Room

Date: 05 September 2013

Time: 12:30 - 13:30  CEST