From the Editor

Dear Readers,

Welcome to the fifth issue of The International Trade Journal (ITJ)’s thirty-third volume. The articles in this issue look at the correlation between domestic savings and investment, trade between the U.S. and Canada, the agri-food industry in Southern Europe, and the dynamics of shale oil production.

The first article in this issue, by Tarlok Singh, looks at one of the main puzzles in open economy macroeconomics – the counterintuitive correlation between domestic savings and investment in a world where capital can move easily between countries. The study uses data from 24 OECD countries between 1970 and 2006. The author finds that savings and investment are cointegrated for most countries in the sample and that the correlation is high for many of them. The author also notes, however, that cointegration breaks down for some countries for short periods within the sample.

The second article, by Fred Olayele, uses a gravity model to explore trade between U.S. states and Canadian Provinces. The estimators control for differences in factor endowments and income differentials and allow for unobserved heterogeneity and zero-trade flows. The author finds a border effect between contiguous states and provinces, between contiguous states in the U.S., and between contiguous provinces in Canada. The results support the Linder hypothesis that states and provinces with similar income levels trade more than expected due to similar tastes. In contrast, the results do not support the Heckscher-Ohlin hypothesis.

The third article, by Sandro Rondinella, Mariarosaria Agostino, Federica Demaria, and Sophie Drogué, compares Italy’s exports of food and drink to the United States and the European Union with similar exports from France, Spain, Greece, and Portugal. They find that Italy’s exports are most similar to France and Spain’s exports. Italy competes most directly in terms of products with France in the U.S. but competes similarly with France and Spain in Europe. Finally, they note that the similarity falls significantly once they account for quality differences.

The final article in this issue, by David Hudgins and Jim Lee, explains how recent advances in modeling oil production can help explain how to understand the dynamics of shale oil production in the United States.¹ The authors construct a dynamic model and use numerical simulations to explain recent patterns of oil production. They argue that price changes alone do not explain the rapid growth of shale oil production. Instead, they argue it can be best explained by technological advances that have increased efficiency, lowered costs, and reduced breakeven prices for shale producers.

As usual, we would like to thank the people without whom the ITJ would not succeed. We would like to thank the authors who contribute their articles, the anonymous referees who give detailed and timely comments, the team at the International Trade Institute at Texas A&M International University who process submissions quickly and efficiently, our Editorial Board who guide the journal, and our publisher, Taylor and Francis, who ensures the ITJ keeps its high standards.

Notes

¹ Several recent articles in the ITJ, including Hudgins and Lee (2016) and Ginn and Roach (2015), have also looked at changes in oil production in Texas and other parts of the United States.