Trade between China and the Netherlands; A Case Study of Globalization

Tinbergen Institute Discussion Paper No. 08-016/3

32 Pages Posted: 13 Feb 2008

See all articles by Frank A. G. den Butter

Frank A. G. den Butter

Vrije Universiteit Amsterdam - Economics

Raphie Hayat

affiliation not provided to SSRN

Date Written: February 12, 2008

Abstract

During the last decades, the growth of trade between China and the Netherlands has been larger than the increase in bilateral trade flows between China and most other countries. Using a time series based gravity model, this paper investigates the main determinants of this increase. The empirical analysis indicates that, apart from GDP growth, Dutch in-house offshoring to China is a major determinant of Dutch import growth from China. Dutch firms tend to offshore production in-house when the asset specificity of the traded inputs is high and offshore via the market when this asset specificity is low. Controlling for these product types also reveals that transport costs are more important for trade in homogeneous and reference priced goods than for trade in differentiated goods.

Keywords: international trade, transaction costs, offshoring, foreign direct investments, asset specificity, gravity model

JEL Classification: F14, L16, L23

Suggested Citation

den Butter, Frank A. G. and Hayat, Raphie, Trade between China and the Netherlands; A Case Study of Globalization (February 12, 2008). Tinbergen Institute Discussion Paper No. 08-016/3, Available at SSRN: https://ssrn.com/abstract=1092795 or http://dx.doi.org/10.2139/ssrn.1092795

Frank A. G. Den Butter (Contact Author)

Vrije Universiteit Amsterdam - Economics ( email )

Boelelaan 1105
NL 1081 HV Amsterdam
Netherlands
+31 20 444 6030 (Phone)

Raphie Hayat

affiliation not provided to SSRN

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