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Gravity and heterogeneous trade cost elasticities
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Chen, Natalie and Novy, Dennis (2022) Gravity and heterogeneous trade cost elasticities. The Economic Journal, 132 (644). pp. 1349-1377. doi:10.1093/ej/ueab067 ISSN 0013-0133.
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Official URL: https://doi.org/10.1093/ej/ueab067
Abstract
How do trade costs affect international trade? This paper offers a new approach. We rely on a flexible gravity equation that predicts variable trade cost elasticities, both across and within country pairs. We apply this framework to popular trade cost variables such as currency unions, trade agreements, and WTO membership. While we estimate that these variables are associated with increased bilateral trade on average, we find substantial heterogeneity. Consistent with the predictions of our framework, trade cost effects are strong for ‘thin’ bilateral relationships characterised by small import shares, and weak or even zero for ‘thick’ relationships.
| Item Type: | Journal Article | ||||||||||||
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| Subjects: | H Social Sciences > HF Commerce | ||||||||||||
| Divisions: | Faculty of Social Sciences > Economics | ||||||||||||
| Library of Congress Subject Headings (LCSH): | International trade -- Costs, Gravity model of international trade, Tariff, Monetary unions | ||||||||||||
| Journal or Publication Title: | The Economic Journal | ||||||||||||
| Publisher: | Oxford University Press | ||||||||||||
| ISSN: | 0013-0133 | ||||||||||||
| Official Date: | May 2022 | ||||||||||||
| Dates: |
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| Volume: | 132 | ||||||||||||
| Number: | 644 | ||||||||||||
| Page Range: | pp. 1349-1377 | ||||||||||||
| DOI: | 10.1093/ej/ueab067 | ||||||||||||
| Status: | Peer Reviewed | ||||||||||||
| Publication Status: | Published | ||||||||||||
| Reuse Statement (publisher, data, author rights): | This is a pre-copyedited, author-produced version of an article accepted for publication in The Economic Journal following peer review. The version of record Natalie Chen, Dennis Novy, Gravity and Heterogeneous Trade Cost Elasticities, The Economic Journal, 2021;, ueab067 is available online at: https://doi.org/10.1093/ej/ueab067 | ||||||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||||||
| Date of first compliant deposit: | 31 August 2021 | ||||||||||||
| RIOXX Funder/Project Grant: |
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