IDEAS Search: (border | home bias) + trade + gravity

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Search for (border | home bias) + trade + gravity. Search results: border : 12780, bordering : 173, borderings : 0, bordered : 36, borderer : 0, borders : 3259, home : 24195, homely : 0, homing : 97, homed : 3, homer : 76, homers : 2, homes : 2417, bias : 28993, biasing : 197, biased : 8294, biases : 5325, biasness : 12, trade : 188418, trading : 36145, traded : 7679, trader : 1442, traders : 6966, trades : 4300, gravity : 5790, gravities : 1. Results 1-50 of 370. Search took 1.695 seconds
1. The Impact of Technical Barriers to Trade on Home Bias : An application to EU data [60.614%]
Mark VANCAUTEREN (2002)
Downloadable! The purpose of this paper is trying to estimate the impact of technical barriers to trade on bilateral trade flows of individual EU countries and to evaluate the downward impact of national border on trade flows (home bias). Here we try and identify the effect of technical barriers to trade on EU imports applied to data in which sectors where the EU has sought to introduce harmonized technical regulations to remove technical barriers to trade (New Approach, Old Approach, Mutual Recognition) as well as an aggregate of sectors for which technical barriers are deemed to be unimportant. Using the gravity model, we find that home bias remains substantial for products where the EU has sought to introduce harmonized technical regulations to remove technical barriers to trade but mutual recognition sectors exhibit the smallest home bias. Based upon the analysis on the evolution of home bias in the EU, we find no evidence that the home bias has decreased for products where differences in technical regula
2. Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade [56.267%]
Cletus C. Coughlin & Dennis Novy (2012)
Downloadable! Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a data set of exports from individual U.S. states to foreign countries and combine it with trade flows between and within U.S. states. After controlling for distance and country size, we estimate that relative to state-to-state trade, crossing an individual U.S. state's domestic border appears to entail a larger trade barrier than crossing the international U.S. border. Due to the absence of governmental impediments to trade within the United States, this result is surprising. We interpret it as highlighting the concentration of economic activity and trade flows at the local level.
3. Home and regional biases and border effects in Armington type models [56.252%]
Whalley, John & Xin, Xian (2009)
Downloadable (with restrictions)! We discuss biases in preferences and their trade effects in terms of impacts on non-neutral trade flows motivated by recent literature on both home bias and the border effect. These terms take on multiple definitions in the literature and are often used interchangeably even though they differ. The border effect refers to a higher proclivity to trade behind rather than across national borders and is usually defined by the coefficients of regional dummies from an estimated gravity model. It can be present both in data and in counterfactual model solutions. Sometimes the reduced form of the gravity model used is asserted to reflect an Armington type model. For the border effect to occur as a model outcome, a structural model with at least 2 home regions and 1 country abroad is needed. In contrast to current literature, we offer a characterization of various forms of preference bias in trade models and measures of their associated trade effects based on a concept we term trade ne
4. Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade [56.162%]
Thierry Mayer & Keith Head (2002)
Downloadable! No abstract is available for this item.
5. Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade [56.144%]
Cletus C. Coughlin & Dennis Novy (2009)
Downloadable! Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a unique data set of exports from individual U.S. states to foreign countries and combine it with trade flows between and within U.S. states. After controlling for distance and country size, we estimate that relative to state-to-state trade, crossing an individual U.S. state’s domestic border appears to entail a larger trade barrier than crossing the international U.S. border. Due to the absence of governmental impediments to trade within the United States, this result is surprising. We interpret it as highlighting the concentration of economic activity and trade flows at the local level.
6. A Test of Trade Theories when Expenditure is Home Biased [55.779%]
Marius BRÜLHART & Federico TRIONFETTI (2001)
Downloadable! We develop and apply a criterion to distinguish two paradigms of international trade theory: constant-returns perfectly competitive models, and increasing-returns monopolistically competitive models. Our analysis makes use of the pervasive presence of home-biased expenditure. It predicts that countries' relative output and their relative home biases are positively correlated in increasing-returns sectors, while no such relationship exists in constant-returns sectors. We estimate country-level sectoral home biases through a gravity equation for international and intranational trade, and we use those estimates to implement our test on input-output data for six European Union economies.
7. How Much Does Geography Deflect Services Trade? [53.927%]
Anderson, James & Milot, Catherine & Yotov, Yoto (2012)
Downloadable! We estimate geographic barriers to trade in nine service categories for Canada's provinces from 1997 to 2007 with novel high quality bilateral provincial trade data. The border directly reduces average provincial trade with the US relative to interprovincial trade to 2.4% of its borderless level. Third party effects acting through multilateral resistance combine with direct effects to reduce foreign relative to interprovincial trade to 0.1% of its frictionless potential. The downward deflection of international services trade is some 7 times smaller than the deflection of international goods trade. Surprisingly, intraprovincial trade in services and goods is equally deflected upward.
8. Drivers and impediments for cross-border e-commerce in the EU [52.215%]
Estrella Gomez & Bertin Martens & Geomina Turlea (2013)
Downloadable! There are no official statistics on international online trade in goods so far. This paper uses a consumer survey to construct a unique matrix of online B2C domestic and cross-border trade in goods between the 27 EU Member States. We compare online and offline trade patterns for similar goods. We find that the standard gravity model performs well in explaining online cross-border trade flows. The model confirms the strong reduction in geographical distance-related trade costs, compared to offline trade. However, the trade costs associated with crossing language barriers increase when moving from offline to online trade. Institutional variables such as online payments facilities and cost-efficiency of parcel delivery systems might play a significant role in cross-border trade and our analysis confirms this. In a linguistically segmented market like the EU, online home market bias remains high compared to bias in offline cross-border trade. We conclude that it is hard to predict at this stage whet
9. Trade Costs, Trade Balances And Current Accounts: An Application Of Gravity To Multilateral Trade [51.649%]
Giorgio Fazio & Ronald MacDonald & Jacques Melitz (2007)
Downloadable! In this paper we test the well-known hypothesis of Obstfeld and Rogoff (2000) that trade costs are the key to explaining the so-called Feldstein-Horioka puzzle. Our approach has a number of novel features. First, we focus on the interrelationship between trade costs, the trade account and the Feldstein-Horioka puzzle. Second, we use the gravity model to estimate the effect of trade costs on bilateral trade and, third, we show how bilateral trade can be used to draw inferences about desired trade balances and desired intertemporal trade. Our econo-metric results provide strong support for the Obstfeld and Rogoff hypothesis and we are also able to reconcile our results with the so-called home bias puzzle.
10. The Border Effect in the Japanese Market: Gravity Model Analysis [51.424%]
Okubo, Toshihiro (2000)
Downloadable! This paper analyzes the border effect, which indicates how biased interregional trade is, compared with international trade, by means of the Gravity Model. The border effect reveals how open to the foreign countries the nation is. This research suggests that the border effect in Japan is much lower than that of the US and Canada, and has declined year by year. Furthermore, in 1990, the border effect faded out. These trends may be reflected by international incidents such as the surge of the foreign direct investment to Asian countries and the decline of tariff rate.
11. What does economic research tell us about cross-border e-commerce in the EU Digital Single Market? [51.070%]
Bertin Martens (2013)
Downloadable! This paper presents a non-technical summary of the latest economic research studies on cross-border e-commerce in the EU and elsewhere, and combines this with findings from older research on this subject. It compares online with offline cross-border trade and investigates the differences in drivers and impediments to both. It also looks into research findings regarding consumer motives to shift from offline to online trade and explores possible sources of consumer welfare increase as a result of this shift. Finally, it flags issues for further research. The main purpose of this note is to bring the findings from recent research together in a coherent framework and make it accessible to stakeholders and decision-makers involved in EU policy-making on the Digital Agenda for Europe and the EU Digital Single Market.
12. The Gravity Equation in International Trade [50.889%]
Michele Fratianni (2007)
Downloadable! This chapter offers a selective survey of the gravity equation (GE) in international trade. This equation started in the Sixties as a purely empirical proposition to explain bilateral trade flows, without little or no theoretical underpinnings. At the end of the Seventies, the GE was "legitimized" by a series of theoretical articles that demonstrated that the basic GE form was consistent with various models of trade flows. Empirical applications of GE expanded to cover a variety of issues, such as the impact of regional trade agreements, national borders and currency unions on trade, as well as the use of the equation to sort out the relative merit of alternative trade theories. A new wave of studies is now concentrating on the general equilibrium properties of the GE and finer econometrics points. The renewed interest of the academic profession in the development of the GE is undoubtedly driven by the equation’s empirical success.
13. Geography and Intra-National Home Bias: U. S. Domestic Trade in 1949 and 2007 [50.582%]
Crafts, Nicholas & Klein, Alexander (2013)
Downloadable (with restrictions)! This paper examines home bias in U. S. domestic trade in 1949 and 2007. We use a unique dataset of 1949 carload waybill statistics produced by the Interstate Commerce Commission and 2007 Commodity Flow Survey data. The results show that home bias was considerably smaller in 1949 than in 2007 and that home bias in 1949 was even negative for several commodities. We argue that the difference between the geographical distribution of manufacturing activities in 1949 and that of 2007 is an important factor explaining the differences in the magnitudes of home-bias estimates in those years.
14. Geography and Intra-National Home Bias: U.S. Domestic Trade in 1949 and 2007 [49.815%]
Nicholas Crafts & Alexander Klein (2013)
Downloadable! This paper examines home bias in U.S. domestic trade in 1949 and 2007. We use a unique data set of 1949 carload waybill statistics produced by the Interstate Commerce Commission, and 2007 Commodity Flow Survey data. The results show that home bias was considerably smaller in 1949 than in 2007 and that home bias in 1949 was even negative for several commodities. We argue that the difference between the geographical distribution of the manufacturing activities in 1949 and that of 2007 is an important factor explaining the differences in the magnitudes of home-bias estimates in those years.
15. Geography and Intra-National Home Bias: U.S. Domestic Trade in 1949 and 2007 [49.815%]
Crafts, Nicholas & Klein, Alexander (2013)
Downloadable! This paper examines home bias in U.S. domestic trade in 1949 and 2007. We use a unique data set of 1949 carload waybill statistics produced by the Interstate Commerce Commission, and 2007 Commodity Flow Survey data. The results show that home bias was considerably smaller in 1949 than in 2007 and that home bias in 1949 was even negative for several commodities. We argue that the difference between the geographical distribution of the manufacturing activities in 1949 and that of 2007 is an important factor explaining the differences in the magnitudes of home-bias estimates in those years.
16. Regional Borders and Trade in Asia [48.839%]
Woong Lee & Chankwon Bae (2013)
Downloadable! This paper investigates the effect of regional borders on trade in Asia. The regional borders define the three regions of Asia : South, Southeast, and East Asia. Regional trade indicates the flows of trade within a region, whereas regional border trade means trade across regions. A gravity model is augmented with the region dummies to estimate the regional border effects that capture any and all time-invariant factors promoting or impeding regional trade. The main finding is that regional border effects are asymmetric on the three regions in Asia. There is a large and significant regional border effect on South Asia, small on Southeast Asia, and negligibly negative on East Asia. The significant and positive regional border effect in South Asia suggests that countries share intrinsic factors facilitating trade between the countries in this region. Although the regional border effect of Southeast Asia is positive, its magnitude shows little difference between its regional trade and regional border
17. Border effects and border regions: Lessons from the German unification [47.859%]
Nitsch, Volker (2002)
Downloadable! This paper examines data on trade flows between West German Bundesländer (federal states) and East Germany to explore the effect of national borders on trade. Although the data cover only a small fraction of intra-German trade flows, I find a home bias of about factor 2.2; West German shipments to East Germany are about 120% larger than deliveries to an otherwise similar foreign country. Based on this result, possible implications for border regions are discussed --
18. The Gravity Equation in International Trade [47.848%]
Michele FRATIANNI (2007)
Downloadable! This chapter offers a selective survey of the gravity equation (GE) in international trade. This equation started in the Sixties as a purely empirical proposition to explain bilateral trade flows, without little or no theoretical underpinnings. At the end of the Seventies, the GE was "legitimized" by a series of theoretical articles that demonstrated that the basic GE form was consistent with various models of trade flows. Empirical applications of GE expanded to cover a variety of issues, such as the impact of regional trade agreements, national borders and currency unions on trade, as well as the use of the equation to sort out the relative merit of alternative trade theories. A new wave of studies is now concentrating on the general equilibrium properties of the GE and finer econometrics points. The renewed interest of the academic profession in the development of the GE is undoubtedly driven by the equation's empirical success.
19. The Border Effect in the Japanese Market: A Gravity Model Analysis [47.564%]
Toshihiro Okubo (2003)
Downloadable! This paper uses a Gravity Model to analyze the border effect in the Japanese market, which indicates how biased interregional trade is compared with international trade. The results suggest that the border effect in Japan is much lower than in the United States and Canada, and has declined year by year between 1960 and 1990. Possible reasons for the decline include the reduction of tariff rates and non-tariff barriers, the surge of foreign direct investment, and the appreciation of the yen.
20. Trade Costs, Trade Balances and Current Accounts: An Application of Gravity to Multilateral Trade [46.397%]
Giorgio Fazio & Ronald MacDonald & Jacques Melitz (2005)
Downloadable! In this paper we test the well-known hypothesis of Obstfeld and Rogoff (2000) that trade costs are the key to explaining the so-called Feldstein-Horioka puzzle. Using a gravity framework in an intertemporal context, we provide strong support for the hypothesis and we reconcile our results with the so-called home bias puzzle. Interestingly, this requires a fundamental revision of Obstfeld and Rogoff’s argument. A further novelty of our work is in tying bilateral trade behavior to desired aggregate trade balances and desired intertemporal trade.
21. Trade Costs, Trade Balances and Current Accounts: An Application of Gravity to Multilateral Trade [46.354%]
Giorgio Fazio & Ronald MacDonald & Jacques Melitz (2008)
Downloadable (with restrictions)! In this paper we test the well-known hypothesis of Obstfeld and Rogoff (2000) that trade costs are the key to explaining the so-called Feldstein-Horioka puzzle. Using a gravity framework in an intertemporal context, we provide strong support for the hypothesis and we reconcile our results with the so-called home bias puzzle. Interestingly, this requires a fundamental revision of Obstfeld and Rogoff’s argument. A further novelty of our work is in tying bilateral trade behavior to desired aggregate trade balances and desired intertemporal trade.<P>(This abstract was borrowed from another version of this item.)
22. Access to OECD Agricultural Market: A Gravity Border Effect Approach [46.119%]
Olper, Alessandro & Raimondi, Valentina (2005)
Downloadable! This paper uses the border effect estimate from a gravity model to assess the level of trade integration in agricultural markets between 22 OECD countries, over the 1995-2002 period. The empirical analysis shows that using a gravity equation derived from theory, in the estimation of the border effect, matters. A representative estimate of the border effect shows that crossing a national border into the OECD countries induces a trade-reduction effect by a factor of 8. This average value masks substantial differences in market access across the country groups considered, with higher value in trade between EU countries and lower in trade between CEEC countries. However, the trade integration between CEECs and others OECDs increases substantially in the observed period. Finally, the equivalent tariffs implied by the estimated border effects are not implausible when compared to the actual range of direct protection measures.
23. International Terrorism, International Trade, and Borders [46.077%]
Michele Fratianni & Heejoon Kang (2006)
Downloadable! This paper shows that terrorism reduces bilateral trade flows, in real terms, by raising trading costs and hardening borders. Countries sharing a common land border and suffering from terrorism trade much less than neighboring or distant countries that are free of terrorism. The impact of terrorism on bilateral trade declines as distance between trading partners increases. This result suggests that terrorism redirects some trade from close to more distant countries. Our findings are robust in the presence of a variety of other calamities such as natural disasters or financial crises.
24. Trade Costs, Trade Balances and Current Accounts: An Application of Gravity to Multilateral Trade [45.611%]
Fazio, Giorgio & MacDonald, Ronald & Mélitz, Jacques (2005)
Downloadable (with restrictions)! In this paper we test the well-known hypothesis of Obstfeld and Rogoff (2000) that trade costs are the key to explaining the so-called Feldstein-Horioka puzzle. Using a gravity framework in an intertemporal context, we provide strong support for the hypothesis and we reconcile our results with the so-called home bias puzzle. Interestingly, this requires fundamental revision of Obstfeld and Rogoff’s argument. A further novelty of our work is in tying bilateral trade behaviour to desired aggregate trade balances and desired intertemporal trade.
25. The International-Trade Network: Gravity Equations and Topological Properties [45.443%]
Giorgio Fagiolo (2009)
Downloadable! This paper begins to explore the determinants of the topological properties of the international - trade network (ITN). We fit bilateral-trade flows using a standard gravity equation to build a ''residual'' ITN where trade-link weights are depurated from geographical distance, size, border effects, trade agreements, and so on. We then compare the topological properties of the original and residual ITNs. We find that the residual ITN displays, unlike the original one, marked signatures of a complex system, and is characterized by a very different topological architecture. Whereas the original ITN is geographically clustered and organized around a few large-sized hubs, the residual ITN displays many small-sized but trade-oriented countries that, independently of their geographical position, either play the role of local hubs or attract large and rich countries in relatively complex trade-interaction patterns.
26. The international-trade network: gravity equations and topological properties [45.413%]
Giorgio Fagiolo (2010)
Downloadable (with restrictions)! This paper begins to explore the determinants of the topological properties of the international - trade network (ITN). We fit bilateral-trade flows using a standard gravity equation to build a "residual" ITN where trade-link weights are depurated from geographical distance, size, border effects, trade agreements, and so on. We then compare the topological properties of the original and residual ITNs. We find that the residual ITN displays, unlike the original one, marked signatures of a complex system, and is characterized by a very different topological architecture. Whereas the original ITN is geographically clustered and organized around a few large-sized hubs, the residual ITN displays many small-sized but trade-oriented countries that, independently of their geographical position, either play the role of local hubs or attract large and rich countries in relatively complex trade-interaction patterns.<P>(This abstract was borrowed from another version of t
27. Trade Bloc Formation in Interwar Japan --Gravity Model Analysis-- (forthcoming in Journal of the Japanese and International Econ [45.167%]
Toshihiro Okubo (2006)
Downloadable! The purpose of this paper is to discuss the trading system in the interwar period concerning the Japanese Empire by means of border effect analysis in the gravity model. The results show sizeable and steadily increasing trading bloc border effects from the 1910s through the 1930s. This sizeable border effect might have resulted from many possible factors: trade diversion and creation due to increased protectionism and industrialisation in Korea and Formosa, certain political factors, and Japanese migration to Korea and Formosa, which contributed to a 52% increase of bloc border effects in mainland Japan.
28. New Borders and Trade Flows: A Gravity Model Analysis of the Baltic States [44.529%]
Darren Byers & Talan IÅŸcan & Barry Lesser (2000)
Downloadable (with restrictions)! The objective of this paper is to provide evidence on the effects of an economic and political union by studying the trade flows of the three Baltic countries of Estonia, Latvia and Lithuania after the breakup of the Soviet Union. We specify and estimate a gravity model of exports for the Nordic countries which enables us to determine the size and direction of trade flows in the Baltic states had they not been affected by the political institutions of the Soviet Union. Our results suggest that Baltic foreign trade was not only reduced significantly but also diverted to the members of the former Soviet Union. Consistent with our estimates, we also find that these consequences of the former political union are quickly dissipating, and the Baltic countries are increasing their share of exports to the European Union and the U.S. Copyright Kluwer Academic Publishers 2000
29. An Analysis of Cambodia’s Trade Flows: A Gravity Model [44.455%]
Kim, Sokchea (2006)
Downloadable! This paper aims at investigating the important factors affecting Cambodia’s trade flows to major 20 trading countries from 1994 to 2004. The analysis employs a gravity model with some modifications. Assuming that other factors are constant, the results indicate that the trade flows significantly depend on the economic sizes of both the exporting and importing countries and Cambodia appears to trade more with neighboring countries. In addition, the tests also detect the significant negative impact of exchange rate volatility on the trade flows as well as aggregate exports; however, there is little evidence that the depreciation of Cambodia’s currency, the riel, affects its exports. Nonetheless, the tests using sub-period samples suggest that the positive impacts of bilateral exchange rate depreciation are found significant in sub-period I (1994-1998), but not in sub-period II (1999-2004). Finally, the paper also shows consistent findings that ASEAN membership play little role in boosting trad
30. Oilseed Trade Flows: A Gravity Model Approach to Transportation Impacts [44.280%]
Xia, Ying & Houston, Jack E. & Escalante, Cesar L. & Epperson, James E. (2012)
Downloadable! Oilseeds and oilseed products are vital commodities in international trade, and production has been rapidly expanded in recent years under the yield growth and demand characteristics linked to more income-elastic products. Of the global production for major oilseeds, which reached 395.2 million metric tons in 2009, three major producers – the United States, Brazil and China – account for almost 50 percent. This paper develops a broad trade framework to estimate the impacts of transportation costs on international oilseeds trade using gravity models. We describe export and import markets of oilseeds and derived vegetable oils. A Baier and Berstrand gravity model method (2009), using a Taylor-series expansion, reveals a theoretical relationship between incomes, trade flows and trading costs through a reduced-form gravity specification. Distance between two countries and border trade barriers have significant and substantive impacts on the trade value of oilseeds and oilseeds oils.
31. Regionalization and Home Bias: The Case of Canada [43.631%]
Ceglowski, Janet (2000)
The bilateral trade flows between Canada and the US have grown rapidly in the 1990s. Are they evidence of an emerging North American trading bloc? A gravity model of trade finds that while economic size and proximity can explain much of the substantial trade between Canada and the US, the US bias in Canada’s merchandise trade has grown since the formation of the Canada-US Free Trade Area. The rise in the US bias reflects an emerging gap between Canada's home bias relative to the US and its home bias relative to the other major industrial countries.
32. India’s Trade and Gravity Model: A Static and Dynamic Panel Data [43.528%]
Tripathi, Sabyasachi & Leitão, Nuno Carlos (2013)
Downloadable! This paper examines the India’s trade flows using a gravity model for the period 1998-2012. We selected the following major trade partners: China PRP, United Arab Emirates, United States, Saudi Arab, Switzerland, Singapore, Germany, Hong Kong, Indonesia, Iraq, Japan, Belgium, Kuwait, Korea RP, Nigeria, Australia, United Kingdom, Iran, South Africa, and Qatar. In this research we apply a static and dynamic panel. We find evidence that political globalization and cultural proximity have a positive influence in bilateral trade. We also introduce economic size and common border these proxies confirming a positive impact of bilateral trade. These results show that the gravity model can explain the pattern of bloc’s trade.
33. National Borders Matter… But Less and Less [43.165%]
Thierry Mayer (2001)
Downloadable! No abstract is available for this item.
34. Holding together or falling apart:Results of gravity equation of the CIS trade [42.944%]
Kurmanalieva, Elvira & Vinokurov, Evgeny (2011)
Downloadable! The main purpose of this paper is to assess intra-regional trade within the CIS by looking at the impact of numerous trade agreements in the region. Applying a gravity model on a set of 162 countries, we attempt to assess dynamics of intra-regional trade of various trade agreements between 1995 and 2008 in order to identify trade creation and trade diversion effects. We propose and empirically test three explanations of the CIS intra-regional trade: 1) home bias effect, 2) holding together effect and 3) holdup effect. Finally, we perform a simulation of potential trade and see to what extent twelve post-Soviet states and all their groupings would, ceteris paribus, have traded with each other.
35. Trade-Enhancing EU Enlargement and the Resurgence of East-East Trade [42.754%]
Cecília Hornok (2010)
Downloadable! This article uses the episode of EU enlargement in 2004 as a natural experiment to identify the trade effect of declining border barriers across otherwise well integrated markets. Despite the fact that traditional trade policy measures (tariffs, quantitative restrictions) were already eliminated for most industrial goods in trade between the pre-enlargement EU-15 countries and eight of the countries that entered the EU in 2004 (EU-8)2 as well as among the EU-8 themselves, EU enlargement is shown to have caused a significant trade creation. The effect was most pronounced for trade among EU-8 countries, with a magnitude of 4% to 9% in ad valorem tariff-equivalent terms. Technology-intensive industries benefitted most strongly from enlargement, and a significant anticipatory effect can also be detected for 2003. These findings highlight the importance of non-policy related border barriers to trade and may also prove useful in assessing the potential for trade integration in the current EU candidate
36. The importance of EU-15 borders for CEECs agri-food exports: The role of tariffs and non-tariff measures in the pre-accession pe [42.582%]
Chevassus-Lozza, Emmanuelle & Latouche, Karine & Majkovic, Darja & Unguru, Manuela (2008)
Downloadable (with restrictions)! This paper assesses the evolution of the EU-15 market access for the agri-food products, originating from CEECs. A gravity model technique has been used to assess the overall trade resistance (border effect), and to weight its various components such as tariff and non-tariff measures (sanitary and phytosanitary standards, other quality measures) in the pre-accession period (1999-2004). The findings reveal, despite the undertaken integration and trade liberalisation processes, a persisting and significant trade resistance for the CEECs' agri-food exports to the EU market, even just prior their accession in 2004. Still present difficulties in market access at the time are partially explained by tariff and non-tariff measures, while a large part of border effect remains in the domain of other, presumably non-trade policy related factors (home bias, consumer preferences, etc.). These results indicate that despite the accession process (customs union and adoption of the EU standar
37. Gravity with google maps: the border puzzle revisited [42.496%]
Sebastian Benz (2013)
Downloadable! I calculate road travel times between the capitals of US states and Canadian provinces with Google Maps. With this measure of trade cost I estimate the US-Canada border effect for aggregate and industry-level trade flows in line with the method introduced by Anderson and van Wincoop (2003), as well as using linar fixed effects and Poisson estimation. I find a high degree of heterogeneity in the resulting coefficients.
38. The Determinants of Bangladesh's Trade: Evidence from the Generalized Gravity Model [42.438%]
Rahman, Mohammad Mafizur (2005)
Downloadable! The application of the generalized gravity model in analyzing the Bangladesh's trade reveals that Bangladesh's trade is positively determined by the size of the economies, per capita GNP differential of the countries involved and openness of the trading countries. Bangladesh's exports are positively determined by the exchange rate, partner countries' total import demand and openness of the Bangladesh economy. Bangladesh's imports are determined by inflation rates, per capita income differentials, openness of the countries involved in trade and the border between India and Bangladesh. Multilateral resistance factors and transportation costs affect Bangladesh's trade positively and negatively respectively.
39. Trade in the Triad: How Easy is the Access to Large Markets? [42.136%]
Lionel Fontagné & Thierry Mayer & Soledad Zignago (2004)
Downloadable! In this paper, we measure market access between the United States, the EU, and Japan (the Triad), using the effect of national borders on trade patterns. We investigate overall and industry-level trends of bilateral trade openness and provide explanations for those using proxies for bilateral observed protection (tariffs and NTBs), home bias of consumers, product differentiation, and levels of FDI. The explanations related to actual protection, home bias and substitutability of goods put together explain a large part of the border effect between blocs of the Triad, although they do not explain the whole of the border effect puzzle.<P>(This abstract was borrowed from another version of this item.)
40. Intranational Home Bias In Trade [41.251%]
Holger C. Wolf (2000)
Downloadable (with restrictions)! A number of recent studies have found intranational trade to be excessive compared to international trade, based on a gravity specification. The preferred explanation for this finding has been the presence of formal and informal trade barriers, with associated welfare consequences. If such barriers were indeed the sole culprit, home bias should not exist on the subnational level. We find, however, that home bias is present within U.S. states, suggesting the presence of other causes of excessive home trade. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
41. Comércio internacional "x" intranacional no Brasil: medindo o efeito-fronteira [International vs. Intranational trade i [40.926%]
Orlando M. da Silva & Fernanda M. de Almeida & Bethania M. de Oliveira (2007)
Downloadable! This paper analyses the border effect on the Brazilian goods market, which indicates how biased intranational trade is compared to international trade. We quantify the border effect empirically using a cross-sectional gravity equation for twenty six Brazilian states plus the Federal District and forty-six countries, and find that although Brazil has been lowering its trade barriers, the border effect is still very high by any standards. The bias in a typical Brazilian state relative to other countries was found to be around 33, suggesting that trade among Brazilian states is thirty-three times as high as trade with a foreign country. The welfare consequences of a bias of this magnitude are likely to be very large for a developing country such as Brazil. It can be explained both by the low degree of substitutability among goods produced in Brazilian states and foreign countries, as well as by the large barriers to international trade.
42. An Empirical Test of Trade Gravity Model Criteria for the West African Monetary Zone (WAMZ) [40.813%]
Balogun, Emmanuel Dele (2008)
Downloadable! This study gauged the effects of output co-variability, intra-industry intensity of trade and endogenous features of the countries such as common language, border, or colonizer, etc. on bilateral trade. The results confirm that similarities in business cycles influence bilateral trade among the countries. While the positive effects of the real GDP variable coefficient estimate confirms the assertion in the literature that larger countries exert a greater gravitational pull on imports and push to exports (Nigeria accounts for approximately 60 per cent of the GDP, land mass and population of the group), the negative sign of the per capita income variable coefficient estimate is also consistent with expectation that poorer countries (in per capita terms) tend to have lesser trade. Also, the coefficient estimates of the intra-industry trade intensity variables were significant. While the positive sign of the intra-industry trade in agricultural commodities suggest that it can, ceteris paribus, lead
43. Does Trade Facilitation Matter in Bilateral Trade ? [40.786%]
Chahir Zaki (2008)
Downloadable! This paper estimates an augmented gravity model incorporating different aspects of Trade Facilitation in develop and developing countries. Trade Facilitation is defined as measures that aim at making international trade easier by eliminating administrative delays, simplifying commercial procedures, increasing transparency, security and the place of new technologies in trade. This paper provides new theoretical and empirical enhancements. On the one hand, the model is based on theoretical foundations related to monopolistic competition and border effects. The orginality of this paper is that Trade Facilitation facets are included in the model. On the other hand, the empirical achievement of the paper is that it uses different databases allowing us to take into account many features of Trade Facilitation. I use several databases coming from different sources : Doing business (World Bank) and Institutional Profiles (CEPII). My main findings show that transaction time for imports and number of docum
44. Does trade facilitation matter in bilateral trade ? [40.786%]
Chahir Zaki (2008)
Downloadable! This paper estimates an augmented gravity model incorporating different aspects of Trade Facilitation in develop and developing countries. Trade Facilitation is defined as measures that aim at making international trade easier by eliminating administrative delays, simplifying commercial procedures, increasing transparency, security and the place of new technologies in trade. This paper provides new theoretical and empirical enhancements. On the one hand, the model is based on theoretical foundations related to monopolistic competition and border effects. The orginality of this paper is that Trade Facilitation facets are included in the model. On the other hand, the empirical achievement of the paper is that it uses different databases allowing us to take into account many features of Trade Facilitation. I use several databases coming from different sources : Doing business (World Bank) and Institutional Profiles (CEPII). My main findings show that transaction time for imports and number of docum
45. The border effect in agricultural markets between European Union, OECD and LDC countries [40.261%]
Olper, Alessandro & Raimondi, Valentina (2004)
Downloadable! No abstract is available for this item.
46. Competitiveness and interregional as well as international trade: The case of Catalonia [40.158%]
Ghemawat, Pankaj & Llano, Carlos & Requena, Francisco (2010)
Downloadable (with restrictions)! Recent years have seen a surge of interest among industrial organization economists in using data on international trade flows as windows into competitiveness. For countries that are at least mid-sized (e.g., Spain), interregional trade tends to be as large as or significantly larger than international trade. The case of Catalonia, a Spanish region, illustrates how ignoring interregional flows can lead to erroneous inferences about a region's external competitiveness. Accounting for Catalonia's interregional as well as international flows shifts what is generally assessed to be a chronic trade deficit in goods into a surplus and changes diagnoses of which Catalan sectors generate external surpluses and who its key trading partners are. We also use a gravity model approach to estimate international border effects for Catalonia.
47. Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation [40.076%]
Baier, Scott L. & Bergstrand, Jeffrey H. (2009)
Downloadable (with restrictions)! Using a Taylor-series expansion, we solve for a simple reduced-form gravity equation revealing a transparent theoretical relationship among bilateral trade flows, incomes, and trade costs, based upon the model in Anderson and van Wincoop [Anderson, James E., and van Wincoop, Eric. "Gravity with Gravitas: A Solution to the Border Puzzle." American Economic Review 93, no. 1 (March 2003): 170-192.]. Monte Carlo results support that virtually identical coefficient estimates are obtained easily by estimating the reduced-form gravity equation including theoretically-motivated exogenous multilateral resistance terms. We show our methodology generalizes to many settings and delineate the economic conditions under which our approach works well for computing comparative statics and under which it does not.
48. Reciprocal Trade Agreements: Impacts on U.S. and Foreign Suppliers in Commodity and Manufactured Food Markets [39.881%]
Vollrath, Thomas L. & Grant, Jason H. & Hallahan, Charles B. (2012)
Downloadable! Reciprocal trade agreements (RTAs), which grant special preferences to members, affect the pattern and volume of bilateral trade in global markets. This study uses the gravity framework and panel data depicting annual trade between 69 countries over 31 years to examine how 11 RTAs have shaped U.S. and other suppliers’ exports of commodity and manufactured foods. Empirical results show that joint RTA membership enabled exporters to increase their trade with member country importers in the two food markets. The few agreements that failed to have a positive effect on member trade in either commodity food or manufactured food involve developing countries that typically grant very limited cross-border trade preference to member countries. Interestingly, model results indicate that RTAs can be a vehicle to increase trade externally. Nine of the 11 RTAs also expanded exports externally to nonmember countries, albeit to a lesser degree than with member importers. In some cases, however, nonmember expo
49. Borders and the Constraints of Globalization [39.294%]
Michele FRATIANNI (2007)
Downloadable! National borders are a big hurdle to the expansion of the open economy. Integration today remains imperfect because national borders translate into trading costs, including differences in monetary regimes. Political borders shelter many goods and services from external competition and, consequently, represent a critical exogenous force in the integration process. Borders are thicker for the small countries than the large countries. Regional trade arrangements have softened or, in some cases, pushed outward national borders, but in the process new borders have emerged. Borders affect also finance and monies. While the speed of financial integration suggests currency consolidation and a decline in the ratio of independent monies to sovereign nations, the formation of multilateral monetary unions pushes the ratio towards unity.
50. Exchange Rate Volatility as a Barrier to Trade: New Methodologies and Recent Evidence [39.254%]
Daria Taglioni (2002)
Downloadable! The analysis of the border effect in a multi-currency framework reveals that volatility accounts for an important part of the border effect in Europe. This paper proposes an explanation of why this methodology yields robust results of the negative effects of volatility on trade, contrary to a three decades-old literature that is characterised by weak and controversial results.
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Search for (border | home bias) trade gravity. Search results: border : 12780, bordering : 173, borderings : 0, bordered : 36, borderer : 0, borders : 3259, home : 24195, homely : 0, homing : 97, homed : 3, homer : 76, homers : 2, homes : 2417, bias : 28993, biasing : 197, biased : 8294, biases : 5325, biasness : 12, trade : 188418, trading : 36145, traded : 7679, trader : 1442, traders : 6966, trades : 4300, gravity : 5790, gravities : 1. Results 51-100 of 370. Search took 1.650 seconds
51. Legal Costs as Barriers to Trade [39.234%]
Turrini, Alessandro Antonio & van Ypersele, Tanguy (2006)
Downloadable (with restrictions)! Recent evidence shows that the 'home bias puzzle' in international trade may be associated with the mere presence of national borders (McCallum (1995)). In this paper we provide a theoretical framework to explain why borders may matter so much for trade. Our argument is that even between perfectly integrated and similar countries the legal system differs, so that legal costs are higher when business is done abroad. Using a matching model of trade, we show that legal costs asymmetry produce home bias in an essentially different way than traditional trade costs. To estimate the relevance of legal costs in displacing trade we estimate gravity equations augmented with variables capturing the extent of legal asymmetries. Evidence from inter-national trade across OECD countries and intra-national trade across French support the view that legal asymmetries act as relevant obstacles to trade.
52. Gravity with Gravitas: A Solution to the Border Puzzle [39.181%]
James E. Anderson & Eric van Wincoop (2000)
Downloadable! The gravity model has been widely used to infer substantial trade flow effects of institutions such as customs unions and exchange rate mechanisms. McCallum [1995] found that the US-Canada border led to trade between provinces that was a factor 22 (2,200%) times trade between states and provinces, a spectacular puzzle in light of the low formal barriers on this border. We show that the gravity model usually estimated does not correspond to the theory behind it. We solve the "border puzzle" by applying the theory seriously. We find that national borders reduce trade between the US and Canada by about 40%, while reducing trade among other industrialized countries by about 30%. The spectacular McCallum headline number is the result of a combination of omitted variables bias and the small size of the Canadian economy.
53. Trade Flows of Bangladesh: A Gravity Model Approach [39.064%]
Mili Roy & Md. Israt Rayhan (2011)
Downloadable! This study gives an overview of different methodologies related to gravity model analysis in Bangladesh trade flow. A pooled cross section and time series data were analyzed to incorporate the country specific heterogeneity in country pair trading partners. The trade flows are justified by the basic gravity model since Bangladesh trade is positively significant by the economy size and inversely related to trade barrier. Accordingly, pooled ordinary least square, fixed effect and random effect methods are implied. This study also explores extended gravity model that depicts trade is determined by the gross domestic product, openness of the economy and exchange rate. In addition, cross section results show that regional trade arrangement which is South Asian Association for Regional Co-operation and border are significant for Bangladesh trade.
54. The geography of asset trade and the euro: insiders and outsiders [39.012%]
Coeurdacier, Nicolas & Martin, Philippe (2007)
Downloadable! This paper analyzes the determinants of cross-border asset holdings on cross-country data and a Swedish data set. We focus our analysis on the effect of the euro not only for the determinants of bond holdings, but also of equity and banking assets. With the help of a simple theoretical model, we attempt to disentangle the different effects that the euro may have had on asset holdings for both euro zone countries and countries outside of the euro zone such as Sweden. We find evidence that the euro has implied 1) a unilateral financial liberalization which makes it cheaper for all countries to buy euro zone assets. For bonds and equity holdings, this would translate into a 14% and 17% decrease in transaction costs. Using Swedish data, we find that the effect is larger for flows than for stocks. 2) a preferential financial liberalization which on top of the previous effect has decreased transaction costs inside the euro zone by 17% and 10% for bonds and equity respectively. 3) a diversion effect du
55. Explaining National Border Effects in the Quad Food Trade [38.580%]
Olper, Alessandro & Raimondi, Valentina (2006)
Downloadable! Starting from a theoretically consistent gravity model, this paper first provides estimates of bilateral 'border effects' in food trade among Quad countries (Canada, USA, Japan and EU) at the ISIC 4-digit level. Then, it investigates the underlying reasons of border effect, assessing the role played by policy barriers (tariffs and non-tariff barriers) with respect to barriers unrelated to trade policy, such as information related costs and cultural proximity. In contrast with several previous findings, we show that policy barriers are part of the story in explaining the strong trade reduction effect induced by national borders, and this is especially true when we control for the endogeneity of trade policy to imports, as suggested by political economy arguments. Moreover, our results show that elements linked to cultural proximity and consumer preference for home goods, matter a great deal in explaining the magnitude of border effects. The trade reduction effect induced by these policy-unrelated
56. The Role of Trade Facilitation in Central Asia: A Gravity Model [38.514%]
Jesus Felipe & Utsav Kumar (2010)
Downloadable! With a decrease in formal trade barriers, trade facilitation has come into prominence as a policy tool for promoting trade. In this paper, we use a gravity model to examine the relationship between bilateral trade flows and trade facilitation. We also estimate the gains in trade derived from improvements in trade facilitation for the Central Asian countries. Trade facilitation is measured through the World Bank’s Logistic Performance Index (LPI). Our results show that there are significant gains in trade as a result of improving trade facilitation in these countries. These gains in trade vary from 28 percent in the case of Azerbaijan to as much as 63 percent in the case of Tajikistan. Furthermore, intraregional trade increases by 100 percent. Among the different components of LPI, we find that the greatest increase in total trade comes from improvement in infrastructure, followed by logistics and efficiency of customs and other border agencies. Also, our results show that the increase in bilat
57. R&D Spillovers, Trade Integration and Expansion of Trade Flows in East -West Asia and Pacific [38.419%]
Seyed Komail Tayebi & Fereshte Eshraghi (2010)
Downloadable! Globalization is a complementary pattern beyond borders that brings about international investment, foreign trade, expansion of information and technology, convergence of production and consumption and integration of financial markets. Economic integration is an aspect of globalization which causes a decrease in prejudicial preventions among countries. In addition, it leads to the simplification of more extensive consumption markets, proficiency in production, use of capital and financial sources, use of technology spillovers, access to foreign investment and international cooperation. In this paper we focus on spillovers, arising from R&D development, trade relations and technology transfer. This study investigates the relationship between R&D spillovers, trade integration and their cross effects on expansion of trade flows in East - West Asia and Pacific. Accordingly, we use an augmented gravity trade model and estimate it the panel data approach to analyze the impacts of R&D spill
58. Can Business and Social Networks Explain the Border Effect Puzzle? [38.132%]
Pierre-Philippe Combes & Miren Lafourcade & Thierry Mayer (2003)
Downloadable! McCallum (1995) shows in an influential contribution that, even when controlling for the impact of bilateral distance and region size, borders sharply reduce trade volumes between countries. We use in this Paper data on bilateral trade flows between 94 French regions, for 10 industries and two years (1978 and 1993) to study the magnitude and variations over time of trade impediments, both distance-related and (administrative) border-related. We focus on assessing the role that business and social networks can play in shaping trade patterns and explaining the border effect puzzle. Using a structural econometric approach, we show that intranational administrative borders significantly affect trade patterns inside France. The impact is of the same order of magnitude as in Wolf (2000) for trade inside the United States. We show that more than 60% of these (puzzling) intranational border effects can be explained by the composition of local labour force in terms of birth place (social networks) and by
59. Home and Regional Biases and Border Effects in Armington Type Models [37.775%]
John Whalley & Xian Xin (2006)
Downloadable! We discuss biases in preferences and their trade effects in terms of impacts on non-neutral trade flows motivated by recent literature on both home bias and the border effect. These terms take on multiple definitions in the literature and are often used interchangeably even though they differ. The border effect refers to a higher proclivity to trade behind rather than across national borders and is usually defined by the coefficients of regional dummies from an estimated gravity model. It can be present both in data and in counterfactual model solutions. Sometimes the reduced form of the gravity model used is asserted to reflect an Armington type model. For the border effect to occur as a model outcome, a structural model with at least 2 home regions and 1 country abroad is needed. In contrast to current literature, we offer a characterization of various forms of preference bias in trade models and measures of their associated trade effects based on a concept we term trade neutrality. These effe
60. Market access in global and regional trade [37.756%]
De Sousa, Jose & Mayer, Thierry & Zignago, Soledad (2011)
Downloadable! This paper develops a method to measure difficulties in market access over a large set of countries (both developing and developed) and industries, during the period 1980-2006. We use a micro-founded heterogeneous-consumers model to estimate the impact of national borders on global and regional trade flows. Results show that difficulties faced by developing countries' exporters in accessing developed markets are 50% higher than those faced by Northern exporters. These international fragmentations have however experienced a noticeable fall since 1980 in both Southern and Northern markets, and in all industries. It is twenty three times easier to enter those markets for a Southern country exporter in 2006 than in 1980. While tariffs still have an influence on trade patterns, they do not seem to explain an important part of the border effect. Last, our theory-based measure offers a renewal of the assessment of the impact of regional trading arrangements. The EU, NAFTA, ASEAN and MERCOSUR agreements
61. Market access in global and regional trade [37.756%]
de Sousa, J. & Mayer, T. & Zignago, S. (2011)
Downloadable! This paper develops a method to measure difficulties in market access over a large set of countries (both developing and developed) and industries, during the period 1980-2006. We use a micro-founded heterogeneous-consumers model to estimate the impact of national borders on global and regional trade flows. Results show that difficulties faced by developing countries' exporters in accessing developed markets are 50% higher than those faced by Northern exporters. These international fragmentation have however experienced a noticeable fall since 1980 in both Southern and Northern markets, and in all industries. It is twenty three times easier to enter those markets for a Southern country exporter in 2006 than in 1980. While tariffs still have an influence on trade patterns, they do not seem to explain an important part of the border effect. Last, our theory-based measure offers a renewal of the assessment of the impact of regional trading arrangements. The EU, NAFTA, ASEAN and MERCOSUR agreements
62. Market Access in Global and Regional Trade [37.756%]
De Sousa, José & Mayer, Thierry & Zignago, Soledad (2012)
Downloadable! This paper develops a method to measure difficulties in market access over a large set of countries (both developing and developed) and industries, during the period 1980-2006. We use a micro-founded heterogeneous-consumers model to estimate the impact of national borders on global and regional trade flows. Results show that difficulties faced by developing countries’ exporters in accessing developed markets are 50% higher than those faced by Northern exporters. These international fragmentations have however experienced a noticeable fall since 1980 in both Southern and Northern markets, and in all industries. It is twenty three times easier to enter those markets for a Southern country exporter in 2006 than in 1980. While tariffs still have an influence on trade patterns, they do not seem to explain an important part of the border effect. Last, our theory-based measure offers a renewal of the assessment of the impact of regional trading arrangements. The EU, NAFTA, ASEAN and MERCOSUR agreemen
63. Road Connectivity and the Border Effect: Evidence from Europe [37.720%]
Henrik Braconier & Mauro Pisu (2013)
Downloadable! Several studies have reported a large negative effect of national borders on the volume of trade. We provide new estimates of the border effect for continental Europe using road rather than great circle – or “as-crows-fly” – distance. Road distances for 48 180 European city pairs have been extracted from Bing Maps Routing Services. As our dataset also has information on travel time, we are able to consider costs related to time in addition to those depending on distance. We find that for the same great circle distance and the same city size, the road distance between two cities located in the same country is around 10% shorter than that between cities located in different ones. Travel speed is also higher between cities in the same country. We find that by using measures based on the actual road distance rather than the great circle distance, the negative effect of international borders on goods trade in a standard gravity equation is lowered by around 15%. Time-related trade costs accou
64. Opening the Interregional Trade "Black Box": The C-lntereg Database for the Spanish Economy (1995-2005) [37.527%]
Carlos Llano & Almudena Esteban & Julian Perez & Antonio Pulido (2010)
Downloadable! Recent literature on border effect has demonstrated that national trade (intra- as well as interregional trade) tends to be more intense than international trade. Unfortunately, owing to the dearth of information on interregional economic relations, this important aspect of the economy has remained relatively ignored. In this article, the authors have described the methodology and main results of the largest estimation of Spanish interregional trade (1995-2005) carried out as a part of the C-lntereg project. The results obtained highlight the importance of the internal trade and the validity of the gravity model. Although the estimation focuses on the Spanish economy, the methodology can easily be applied to other European Union (EU) countries. In the upcoming years, this innovative database will be further developed in all its dimensions (space, time, and sectors) to serve as a promising framework for the application of different techniques such as spatial interaction models or interregional in
65. Regional Integration and International Trade in the Context of EU Eastward Enlargement [37.434%]
Paas, Tiiu (2003)
Downloadable! The paper aims to explore international trade flows of the countries involved in the EU eastward enlargement processes – the current EU members (EU15) and the candidate countries (CC12). The empirical results of the study allow us to conclude that the behaviour of bilateral trade flows within the countries involved in EU eastward enlargement accords to the normal rules of gravitation, having statistically significant spatial biases caused by the trade relations, between the Baltic Sea Region (BSR) countries (the BSR bias), the border countries (the border bias) and the EU member and candidate countries (the East-West bias). The East-West trade relations are still rather weakly developed and there is a statistically significant difference in international trade patterns between the two groups – the current EU members and the applicant countries. The lessons of the Baltic Sea Region in integrating countries with different economic and political backgrounds and developing bilateral trade relati
66. Borders and the Constraints on Globalization [37.237%]
Michele Fratianni (2004)
Downloadable! National borders are a big hurdle to the expansion of the open economy. Integration today remains imperfect because national borders translate into trading costs, including differences in monetary regimes. Political borders shelter many goods and services from external competition and, consequently, represent a critical exogenous force in the integration process. Borders are thicker for the small countries than the large countries. Regional trade arrangements have softened or, in some cases, pushed outward national borders, but in the process new borders have emerged. Borders affect also finance and monies. While the speed of financial integration suggests currency consolidation and a decline in the ratio of independent monies to sovereign nations, the formation of multilateral monetary unions pushes the ratio towards unity.
67. The Geographic Space in International Trade: from Gravity to New Economic Geography [37.116%]
Cafiso, Gianluca (2007)
Downloadable! In this paper we discuss the foundations of two recent trade theories linked by the role that the space-dimension plays in this kind of models. The theories discussed are the Gravity Approach and the New Economic Geography. We dedicate much to the explanation of the micro-foundations of the gravity equation and to the solution of the Border Puzzle achieved in a relevant and innovative paper by Anderson and van Wincoop. Some upto-date empirical applications, which test or use Gravity and NEG relations, are discussed in order to show how much these two theories are used in empirical trade analysis.
68. European integration, FDI and the geography of French trade [36.660%]
Miren Lafourcade & Elisenda Paluzie (2008)
Downloadable! This paper uses an augmented gravity model to investigate whether the 1978-2000 process of European integration has changed the geography of trade within France, with a particular focus on the trends experienced by border regions. We support the conclusion that, once controlled for bilateral distance, origin- and destination-specific characteristics, French border regions trade on average 72% more with nearby countries than predicted by the gravity norm. They perform even better (114%) if they have good cross-border transport connections to the neighboring country. However, this outperformance eroded drastically for the French border regions located at the periphery of Europe throughout integration. We show that this trend is partly due to a decreasing propensity of foreign affliates to trade with their home country. This trade reorientation is less pronounced for the Belgian-Luxembourgian and German firms located in the regions which have better access to the EU core.
69. Trade Facilitation And The Measurement Of Trade Costs [36.365%]
Richard Pomfret & Patricia Sourdin (2010)
Downloadable (with restrictions)! As tariffs and non-tariff barriers (NTBs) fall attention has shifted to trade facilitation, both in the WTO and in regional arrangements such as ASEAN or APEC. Economists have, however, been slow to develop convincing measures of trade costs. Commonly cited estimates of the border effect or of trade costs are huge, but flawed. The gap between CIF and FOB values of trade is the best aggregate measure, but suffers from lack of consistent data. This paper reviews evidence in the literature based on US and Australian import data, extends the sample to include data from Chile and Brazil and concludes that inferences about trade costs are fairly robust across various countries' import datasets.
70. Can Business and Social Networks Explain the Border Effect Puzzle? [36.097%]
Thierry Mayer & Pierre-Philippe Combes & Miren Lafourcade (2004)
Downloadable! McCallum (1995) shows in an influential contribution that, even when controlling for the impact of bilateral distance and region size, borders sharply reduce trade volumes between countries. We use in this paper data on bilateral trade flows between 94 French regions, for 10 industries and 2 years (1978 and 1993) to study the magnitude and variations over time of trade impediments, both distance-related and (administrative) border-related. We focus on assessing the role that business and social networks can play in shaping trade patterns and explaining the border effect puzzle. Using a structural econometric approach, we show that intra-national administrative borders significantly affect trade patterns inside France. The impact is of the same order of magnitude as in Wolf (2000) for trade inside the United States. We show that more than 60\% of these (puzzling) intra-national border effects can be explained by the composition of local labour force in terms of birth place (social networks) and b
71. Can Business and Social Networks Explain the Border Effect Puzzle? [36.097%]
Mayer, Thierry & Pierre-Phillippe Combes & Miren Lafourcade (2003)
Downloadable! McCallum (1995) shows in an influential contribution that, even when controlling for the impact of bilateral distance and region size, borders sharply reduce trade volumes between countries. We use in this paper data on bilateral trade flows between 94 French regions, for 10 industries and 2 years (1978 and 1993) to study the magnitude and variations over time of trade impediments, both distance-related and (administrative) border-related. We focus on assessing the role that business and social networks can play in shaping trade patterns and explaining the border effect puzzle. Using a structural econometric approach, we show that intra-national administrative borders significantly affect trade patterns inside France. The impact is of the same order of magnitude as in Wolf (2000) for trade inside the United States. We show that more than 60\% of these (puzzling) intra-national border effects can be explained by the composition of local labour force in terms of birth place (social networks) and b
72. On the Pro-Trade Effects of Immigrants [36.082%]
Bratti, Massimiliano & De Benedictis, Luca & Santoni, Gianluca (2012)
Downloadable! In this paper we investigate the causal effect of immigration on trade flows, using Italian panel data covering very small geographical units (NUTS-3). Exploiting the very favorable setup offered by Italy's features – the very high number of countries of origin of immigrants ('super-diversity'), the high heterogeneity of social and economic characteristics of Italian provinces coupled with the absence of cultural (e.g. language) or historical (colonial ties) attractors for immigration –, controlling for a wide set of fixed effects, and dealing with the possible distortions generated by the inappropriate choice of the areal unit, we find a positive association between immigrants' stocks and both export and import flows, in line with the past literature. However, using instrumental variables based on migration enclaves, we show that immigrants have a positive and significant effect on imports only.
73. On the pro-trade effects of immigrants [35.997%]
Massimiliano Bratti & Luca De Benedictis & Gianluca Santoni (2013)
Downloadable! In this paper we investigate the causal effect of immigration on trade ows using Italian panel data at the province level. We exploit the exceptional characteristics of the Italian data (the fine geographical disaggregation, the very high number of countries of origin of immigrants, the high heterogeneity of social and economic characteristics of Italian provinces, and the absence of cultural or historical ties) and an empirical strategy based on the comparison of estimates at the NUTS-2 and NUTS-3 geographical level, on the use of a wide set of fixed effects, and on instrument based on immigrants' enclaves. The results are that immigrants have a significant positive effect on both exports and imports, much larger for the latter. The pro-trade effects of immigrants tend to decline in space, and even turn negative when large ethnic communities are located too far away from a specific province (via a trade-diversion effect). Finally, we give evidence of a substantial heterogeneity in the effects o
74. On the Pro-Trade Effects of Immigrants [35.976%]
Massimiliano Bratti & Luca de Benedictis & Gianluca Santoni (2012)
Downloadable! n this paper we investigate the causal effect of immigration on trade flows. We exploit the very favorable set-up offered by the Italian panel data — the fine geographical disaggregation (provinces, i.e., Nomenclature of territorial units for statistics 3 level — NUTS-3), the very high number of countries of origin of immigrants (‘super-diversity’), the high heterogeneity of social and economic characteristics of Italian provinces, and the absence of cultural (e.g. language) or historical (colonial ties) attractors for immigration to deal with the possible distortions generated by the choice of the areal unit (the so-called Modifiable Areal Unit Problem — MAUP), comparing estimates at the NUTS-2 and NUTS-3 geographical level; with unobserved heterogeneity, controlling for a wide set of fixed effects; with the endogeneity of immigrants\' location choices, using instruments based on immigrants\' enclaves. We find that immigrants have a significant positive effect on both exports and impo
75. Notes on CEPII’s distances measures: The GeoDist database [35.821%]
Thierry Mayer & Soledad Zignago (2011)
Downloadable! GeoDist makes available the exhaustive set of gravity variables used in Mayer and Zignago (2005). GeoDist provides several geographical variables, in particular bilateral distances measured using citylevel data to assess the geographic distribution of population inside each nation. We have calculated different measures of bilateral distances available for most countries across the world (225 countries in the current version of the database). For most of them, different calculations of “intra-national distances” are also available. The GeoDist webpage provides two distinct files: a country-specific one (geo_cepii)and a dyadic one (dist_cepii) including a set of different distance and common dummy variables used in gravity equations to identify particular links between countries such as colonial past, common languages, contiguity. We try to improve upon the existing similar datasets in terms of geographical coverage, quality of measurement and number of variables provided.
76. Comércio e integração dos estados brasileiros [35.739%]
Almeida, Fernanda Maria de & Silva, Orlando Monteiro da (2007)
Downloadable! Given that in Brazil there is a significant asymmetry in production and trade among states, this study had as objective to measure the border effect to the intranational and international trade, using it as an indicator of the degree of integration. Such effect measures the bias to the internal trade of a country or state, in comparison to the external trade. A gravity model, including different dummy variables was used as methodology for this study. Results showed that intra-state trade in Brazil was 32 and 96 times larger than interstate and international trade, respectively. Interstate trade, was shown to be around 34 times larger than international trade. The border effect calculated to each state trading to other states, and to the rest of the world, showed smaller values and larger commercial integration among the states of the southeast and south regions of Brazil.
77. Can Business and Social Networks Explain the Border Effect Puzzle? [35.523%]
Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry (2003)
Downloadable (with restrictions)! McCallum (1995) shows in an influential contribution that, even when controlling for the impact of bilateral distance and region size, borders sharply reduce trade volumes between countries. We use in this Paper data on bilateral trade flows between 94 French regions, for 10 industries and two years (1978 and 1993) to study the magnitude and variations over time of trade impediments, both distance-related and (administrative) border-related. We focus on assessing the role that business and social networks can play in shaping trade patterns and explaining the border effect puzzle. Using a structural econometric approach, we show that intranational administrative borders significantly affect trade patterns inside France. The impact is of the same order of magnitude as in Wolf (2000) for trade inside the United States. We show that more than 60% of these (puzzling) intranational border effects can be explained by the composition of local labour force in terms of birth place (soc
78. Rethinking regional competitiveness: Catalonia's international and interregional trade, 1995-2006 [35.523%]
Ghemawat, Pankaj & Llano, Carlos & Requena, Francisco (2009)
Downloadable! Studies of competitiveness tend to focus on a local economy's global interactions, particularly its international trade. But for countries that are at least mid-sized (such as Spain), interregional trade tends to be as large as or significantly larger than international trade. The case of Catalonia illustrates the importance of interregional flows in truly analyzing and devising strategies for a region's external competitiveness. Accounting for interregional trade changes and performing analyses of Catalonia's overall merchandise trade balance, which sectors generate external surpluses as opposed to deficits, and who Catalonia's key trading partners are, and the use of a gravity-model approach to estimate external border effects at the regional level for Catalonia and the rest of Spain, reveal significant variations by sector and by trading partner, generally higher external border effects for exports than imports, and declines in border effects over time - but with a discernible flattening in r
79. New Borders and Trade Flows: a Gravity Model Analysis of the Baltic States [35.347%]
Byers, D.A. & Iscan, T.B. & Lesser, B. (1998)
The objective of this paper is to provide evidence on the effects of an economic and political union by studying the trade flows of the three Baltic countries of Estonia, Latvia and Lithuania after the breakup of the Soviet Union. We specify and estimate a gravity model of exports for the Nordic countries which enables us to determine the size and direction of trade flows in the Baltic states had they not been affected by the political institutions of the Soviet Union.
80. Immigrant-trade links, transplanted home bias and network effects [35.091%]
Roger White (2007)
Downloadable (with restrictions)! Macro-level data for the US and 73 trading partners spanning the years 1980 to 2001 is used with a gravity specification to investigate the influence of immigration on bilateral trade. Prior research has identified immigrant stocks as a significant determinant of trade; however, this study indicates that the US immigrant-trade link is driven by immigration from relatively low income countries. A 10% increase in the immigrant stock is found to generate respectively 4.7 and 1.5% increases in domestic imports from and exports to the typical low income home country. The observed link is decomposed into two hypothesized channels-network effects and transplanted home bias. Considerable variation in per-immigrant trade effects is found across home countries: imports from the typical low income home country are estimated to increase by up to $2057 due to transplanted home bias and by as much as $2967 as a result of network effects, while exports rise by up to $910 as a result of netw
81. What separates us? Sources of resistance to globalization [34.835%]
Head, Keith & Mayer, Thierry (2013)
Downloadable (with restrictions)! With increasing sophistication, economists have been estimating gravity equations for five decades. Robust evidence shows that borders and distance impede trade by much more than tariffs or transports costs can explain. We therefore advocate investigation of other sources of resistance, despite the greater difficulty involved in measuring and modeling them. From our selective review of recent findings, a unifying explanation emerges. A legacy of historical isolation and confl ict forged a world economy in which neither tastes nor information are homogeneously distributed. Cultural difference and inadequate information manifest themselves most strongly at national borders and over distance.
82. A Gravity View of Exchange Rate Disconnect [34.796%]
Fitzgerald, Doireann (2004)
Downloadable! The empirical “gravity†equation is extremely successful in explaining bilateral trade. This paper shows how a multi-country model of specialization and costly trade (i.e. a microfounded gravity model) can be applied to explain empirical exchange rate puzzles. One such puzzle is the fact that nominal exchange rates are enormously volatile, but that this volatility does not appear to affect inflation. The gravity model is very successful in explaining this puzzle. In a sample of 25 OECD countries in the post- Bretton Woods period, the gravity prediction of inflation substantially outperforms the purchasing power parity prediction. The gravity prediction matches the volatility of actual inflation, and tracks its path closely. The superior performance of the gravity prediction is explained primarily by the fact that it takes account of the interaction of specialization with home bias. The stability of inflation in very open economies is explained in addition by the fact that the size of b
83. The International-Trade Network: Gravity Equations and Topological Properties [34.770%]
Giorgio Fagiolo (2009)
Downloadable! This paper begins to explore the determinants of the topological properties of the international - trade network (ITN). We fit bilateral-trade flows using a standard gravity equation to build a "residual" ITN where trade-link weights are depurated from geographical distance, size, border effects, trade agreements, and so on. We then compare the topological properties of the original and residual ITNs. We find that the residual ITN displays, unlike the original one, marked signatures of a complex system, and is characterized by a very different topological architecture. Whereas the original ITN is geographically clustered and organized around a few large-sized hubs, the residual ITN displays many small-sized but trade-oriented countries that, independently of their geographical position, either play the role of local hubs or attract large and rich countries in relatively complex trade-interaction patterns.
84. Trade Preferences and Bilateral Trade in Goods and Services: A Structural Approach [33.931%]
Egger, Peter & Larch, Mario & Staub, Kevin E (2012)
Downloadable (with restrictions)! The large reduction in tariff rates worldwide under several rounds of the GATT is commonly credited with being one of the most notable economic policy accomplishments since World War II. However, the remarkable progress towards free trade of goods is unparalleled in trade with services where liberalization agreements are much harder to achieve and cross-border transactions are impeded by far tighter barriers than for the exchange of goods. In any case, the question as to how trade policy affects services trade is complex for various reasons. First, services transactions are much harder to measure than goods transactions and acceptable data on service trade have only recently become available, mostly for trade of OECD countries. Second, neither production nor trade of goods and services are independent; often they are even inseparable. Thus, achievements towards liberalizing cross-border trade of goods should have an impact on services and, by the same token, the lack of liber
85. Is Gravity Linear? [33.785%]
Millimet, Daniel & Henderson, Daniel (2006)
Downloadable! Despite the solid theoretical foundation on which the gravity model of bilateral trade is based, empirical implementation requires several assumptions which do not follow directly from the underlying theory. First, unobserved trade costs are assumed to be a (log-) linear function of observables. Second, the ad-valorem tax equivalents of trade costs are predominantly assumed to be constant across space, and to a lesser extent time. Maintaining consistency with the underlying theory, but relaxing these assumptions, we estimate gravity models ?in levels and logs ?using two data sets via nonparametric methods. The results are striking. Despite the added flexibility of the nonparametric models, parametric models based on these assumptions offer equally or more reliable in-sample forecasts (sometimes) and out-of-sample forecasts (always), particularly in the levels model. Moreover, formal statistical tests fail to reject the theoretically consistent parametric functional form. Thus, concerns in the gr
86. Why Has the Border Effect in the Japanese Market Declined? [33.088%]
Kyoji Fukao; Toshihiro Okubo (2004)
Downloadable! This paper analyzes the causes of the decline in Japan’s border effect by estimating gravity equations for Japan’s international and interregional trade in four machinery industries (electrical, general, precision, and transportation machinery). In the estimation, we explicitly take account of firms’ networks. We find that ownership relations usually enhance trade between two regions (countries), and also find that we can explain 35% of the decline in Japan’s border effect from 1980 to 1995 in the electrical machinery industry by the increase of international networks. JEL Classification numbers: F14; F17; F21; L14.
87. National borders and international trade: evidence from the European Union [33.034%]
Volker Nitsch (2000)
Downloadable (with restrictions)! In this paper the impact of national borders on international trade within the European Union is considered. Using a gravity model, I find that, averaged over all EU countries, intranational trade is about ten times as high as international trade with an EU partner country of similar size and distance. This relatively strong home bias suggests that even within the European Union national borders still have a decisive impact on trade patterns.
88. Why Has the Border Effect in the Japanese Market Declined?: The Role of Business Networks in East Asia [33.032%]
Kyoji Fukao & Toshihiro Okubo (2004)
Downloadable! This paper analyzes the causes of the decline in Japan’s border effect by estimating gravity equations for Japan’s international and interregional trade in four machinery industries (electrical, general, precision, and transportation machinery). In the estimation, we explicitly take account of firms’ networks. We find that ownership relations usually enhance trade between two regions (countries), and also find that we can explain 35% of the decline in Japan’s border effect from 1980 to 1995 in the electrical machinery industry by the increase of international networks.
89. National Borders and International Trade: Evidence from the European Union [33.031%]
Nitsch, Volker (2000)
In this paper the impact of national borders on international trade within the European Union is considered. Using a gravity model, I find that, averaged over all EU countries, intranational trade is about ten times as high as international trade with an EU partner country of similar size and distance. This relatively strong home bias suggests that even within the European Union national borders still have a decisive impact on trade patterns.<P>(This abstract was borrowed from another version of this item.)
90. Within US Trade and the Long Shadow of the American Secession [32.978%]
Gabriel Felbermayr & Jasmin Gröschl (2011)
Downloadable! Using data from the US commodity flow surveys, we show that the historical Union-Confederacy border lowers contemporaneous trade between US states by about 16 percentrelative to trade flows within the former alliances. Amongst one million placebos, thereis no other constellation of state grouping that would yield a larger border effect. Thefinding is robust over different econometric models, treatment of the rest of the world,available survey waves, or levels of aggregation. Including contemporaneous controls,such as network, institutional or demographic variables, and Heckscher-Ohlin or Linderterms, lowers the estimate only slightly. Historical variables, such as the incidence ofslavery, do not explain the effect away. Adding US states unaffected by the Civil War,we argue that the friction is not merely reflecting unmeasured North-South differences.Finally, the estimated border effect is larger for differentiated than for homogeneousgoods, stressing the potential role for cultural factors and t
91. Estimating Trade and Investment Flows: Partners and Volumes [32.909%]
Alessandro Barattieri (2011)
Downloadable! I present a new stylized fact from a large sample of countries for the period 2000-2006: bilateral foreign direct investment (FDI) flows are almost never observed in the absence of bilateral trade flows. I document a similar pattern using bilateral foreign affiliate sales (FAS), aggregating them up from a large firm level dataset (ORBIS), which includes over 45,000 firms. I propose a model where heterogeneous firms can decide whether to serve foreign markets through export or FDI. I derive theory-based gravity-type equations for the aggregate bilateral trade and foreign affiliate sales (FAS) flows. I then suggest a two-stage estimation procedure structurally derived from the model. In the first stage, an ordered Probit model is used to retrieve consistent estimates of the terms needed to correct the flows equations for firms’ heterogeneity and selection into exports and FDI. In the second stage, a maximum likelihood estimator is applied to the corrected trade and FAS equations. The main result
92. Preference erosion and the developing countries exports to the EU: a dynamic panel gravity approach [32.806%]
Valentina Raimondi & Margherita Scoppola & Alessandro Olper (2012)
Downloadable (with restrictions)! The erosion of preferences due to multilateral tariff reductions is a long-standing concern for many developing countries. This paper focuses on the erosion of the preferences granted by the EU in the rice industry. Since 2004 there has been a sharp decrease in border protection for the EU rice industry. Because the EU grants trade preferences to a considerable number of rice exporting developing countries, the reform implied preference erosion as well. By addressing the impact of preference erosion on developing countries rice exports to the EU, this paper contributes two original insights to the literature: first, by proposing a new empirical approach to compute the preference margin when tariff rate quotas are in force which is based on the assumption of the existence of fixed costs and economies of scale in international trade; second, by estimating the trade elasticities of preferences by means of a dynamic panel gravity equation to deal with the issues of endogeneity of
93. Preference erosion and the developing countries exports to the EU: a dynamic panel gravity approach [32.793%]
Raimondi, Valentina & Scoppola, Margherita & Olper, Alessandro (2011)
Downloadable! Since 2004 there has been a sharp decrease in border protection for the EU rice industry. Because the EU grants trade preferences to a considerable number of rice exporting developing countries, the reform implied preference erosion as well. By addressing the impact of preference erosion on developing countries rice exports to the EU, this paper contributes two original insights to the literature: first, by proposing a new empirical approach to compute the preference margin when tariff rate quotas are in force which is based on the assumption of the existence of fixed costs and economies of scale in international trade; second, by estimating the trade elasticities of preferences by means of a dynamic panel gravity equation to deal with the issues of endogeneity of preferences and persistency in bilateral trade flows. The results show that the way preference margins are calculated matters significantly when assessing the existence and extent of their erosion and the values of trade elasticities.
94. International Trade Integration: A Disaggregated Approach [32.768%]
Natalie Chen & Dennis Novy (2009)
Downloadable! This paper investigates the sources and size of trade barriers at the industry level. We derive a micro-founded measure of industry-specific bilateral trade integration that has an in-built control for time-varying multilateral resistance. This trade integration measure is consistent with a broad range of recent trade models including the Anderson and van Wincoop (2003) framework, the Ricardian model by Eaton and Kortum (2002) and heterogeneous firms models. We use it to explore trade barriers for manufacturing industries in European Union countries between 1999 and 2003. We find a large degree of trade cost heterogeneity across industries. The most important trade barriers are transportation costs and policy factors such as Technical Barriers to Trade. Trade integration is generally lower for countries that opted out of the Euro or did not abolish border controls in accordance with the Schengen Agreement. Reductions in trade barriers explain about one-half of the growth in trade over the period
95. International Trade Integration: A Disaggregated Approach [32.768%]
Natalie Chen & Dennis Novy (2009)
Downloadable! This paper investigates the sources and size of trade barriers at the industry level. We derive a micro-founded measure of industry-specific bilateral trade integration that has an in-built control for time-varying multilateral resistance. This trade integration measure is consistent with a broad range of recent trade models including the Anderson and van Wincoop (2003) framework, the Ricardian model by Eaton and Kortum (2002) and heterogeneous firms models. We use it to explore trade barriers for manufacturing industries in European Union countries between 1999 and 2003. We find a large degree of trade cost heterogeneity across industries. The most important trade barriers are transportation costs and policy factors such as Technical Barriers to Trade. Trade integration is generally lower for countries that opted out of the Euro or did not abolish border controls in accordance with the Schengen Agreement. Reductions in trade barriers explain about one-half of the growth in trade over the period
96. Portuguese Trade and European Union: The Gravity Model [32.762%]
Leitão, Nuno Carlos & Tripathi, Sabyasachi (2013)
Downloadable! This research examines the determinants of bilateral trade between Portugal and European Union countries (EU-27) for the period 2000-2010, using a panel data. In this study we revisited the recent contribution as in Charoensukmongkol and Sexton (2011), Samy and Dehejia (2011), Serrano and Pinilla (2012), and Faustino and Proença (2011). The findings show that Portuguese trade flows are according the Linder hypothesis. The international trade is explained by Heckscher-Ohlin theorem. The empirical results demonstrate that geographical distance has a negative and significant effect on bilateral trade, i.e., there is a bilateral trade increase when trade partners are close. The economic dimension and common border are positively correlated with bilateral trade. Our results also support the hypothesis that physical capital endowment has a positive effect on bilateral trade.
97. The Geography of the Canada-United States Border Effect [32.702%]
Martin Andresen (2010)
Downloadable (with restrictions)! Andresen M. A. The geography of the Canada-United States border effect, Regional Studies. The Canada-United States border effect is a heavily researched area. Despite the plethora of research, very few regional analyses have emerged. This lack of regional analyses is curious because this limited research has shown a strong geographical component to the border effect. This paper contributes to the border effect literature by resolving the border effect through proper economic and statistical specification. Rather than the border representing a strong friction between Canada and the USA, it is shown that most provinces experience an insignificant or positive effect from the border. [image omitted] Andresen M. A. La geographie de l'effet frontalier Canada-Etats-Unis, Regional Studies. L'effet frontalier Canada-Etats-Unis est un sujet qui a fait couler beaucoup d'encre. En depit de la quantite de recherche, il n'en ressort que tres peu d'analyses regionales. Ce manque d'analyses
98. Market access in global and regional trade [32.697%]
de Sousa, José & Mayer, Thierry & Zignago, Soledad (2012)
Downloadable (with restrictions)! This paper develops a method to measure difficulties in market access over a large set of industries and countries (both developing and developed), during the period 1980–2006. We use a micro-founded heterogeneous-consumers model to estimate the impact of national borders on global and regional trade flows. Results show that difficulties faced by developing countries' exporters in accessing developed markets are 50% higher than those faced by Northern exporters. These difficulties have however experienced a noticeable fall since 1980 in all industries. It is twenty three times easier to enter Northern and Southern markets for a Southern country exporter in 2006 than in 1980. Expressed in tariff-equivalent, the level of protection implied when crossing a border fell from 180% to 89% for this same sample. While tariffs still have an influence on trade patterns, they do not seem to explain an important part of the border effect. Last, our theory-based measure offers a renewal
99. The Geography of Asset Trade and the Euro: Insiders and Outsiders [32.598%]
Coeurdacier, Nicolas & Martin, Philippe (2006)
Downloadable! This paper analyzes the determinants of cross-border asset trade on cross-country data and a Swedish data set. We focus our analysis on the impact of the euro for the determinants of bond trade, equity and banking assets. With the help of a theoretical model, we attempt to disentangle the different effects that the euro may have had on asset holdings for both euro zone countries and countries outside of the euro zone such as Sweden. We find evidence that the euro has implied 1) a unilateral financial liberalization which makes it cheaper for all countries to buy euro zone assets. For bonds and equity holdings, this would translate into approximately 14% and 17% decrease in transaction costs. Using Swedish data, we find that this effect of the euro is larger for flows than for stocks. 2) a preferential financial liberalization which on top of the previous effect has decreased transaction costs inside the euro zone by approximately 17% and 10% for bonds and equity respectively. 3) a diversion effe
100. The Geography of Asset Trade and the Euro: Insiders and Outsiders [32.597%]
Coeurdacier, Nicolas & Martin, Philippe (2007)
Downloadable (with restrictions)! This paper analyzes the determinants of cross-border asset trade on cross-country data and a Swedish data set. We focus our analysis on the effect of the euro for the determinants of bond trade, equity and banking assets. With the help of a theoretical model, we attempt to disentangle the different effects that the euro may have had on asset holdings for both euro zone countries and countries outside of the euro zone such as Sweden. We find evidence that the euro has implied 1) a unilateral financial liberalization which makes it cheaper for all countries to buy euro zone assets. For bonds and equity holdings, this would translate into approximately 14% and 17% decrease in transaction costs. Using Swedish data, we find that this effect of the euro is larger for flows than for stocks. 2) a preferential financial liberalization which on top of the previous effect has decreased transaction costs inside the euro zone by approximately 17% and 10% for bonds and equity respectively.
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Search for (border | home bias) trade gravity. Search results: border : 12780, bordering : 173, borderings : 0, bordered : 36, borderer : 0, borders : 3259, home : 24195, homely : 0, homing : 97, homed : 3, homer : 76, homers : 2, homes : 2417, bias : 28993, biasing : 197, biased : 8294, biases : 5325, biasness : 12, trade : 188418, trading : 36145, traded : 7679, trader : 1442, traders : 6966, trades : 4300, gravity : 5790, gravities : 1. Results 101-150 of 370. Search took 1.643 seconds
101. Trade in Value Added : Developing New Measures of Cross-Border Trade [32.070%]
Aaditya Mattoo & Zhi Wang & Shang-Jin Wei (2013)
Downloadable! This volume includes papers that were first presented and discussed at a workshop on 'The Fragmentation of Global Production and Trade in Value- Added: Developing New Measures of Cross Border Trade', held at the World Bank in Washington, DC, on 9 to 10 June, 2011. This publication is structured as follows: chapter one gives and overview of measuring trade in value added when production is fragmented across countries. Chapter two discusses policy rationale and methodological challenges towards the measurement of trade in value-added terms. Chapter three highlights the importance of measuring trade in value added. Chapter four computes and analyses the value-added content of trade. Chapter five proposes an accounting framework for estimating the domestic and foreign content share in a country's exports when processing trade is prevalent. Chapter six provides estimates of foreign and domestic content in Mexico's manufacturing exports that take into account the import content in production under the
102. Talking Trade: Language Barriers in Intra-Canadian Commerce [32.010%]
Nicolas Sauter (2009)
Downloadable! This paper tests for one mechanism that can explain the existence of a language barrier to trade. Specifically, I ask if those industries that require more cross-border communication in order to export their products trade more between Canadian provinces that know the other's language(s). I find that trade in industries with a need to communicate directly (orally) with importers increases with the probability that people in another province speak the same language. This finding can fill a missing link in the empirical trade literature, which lacked convincing arguments for the observed correlation between language commonality and the total volume of trade.
103. Talking trade: language barriers in intra-Canadian commerce [32.009%]
Nicolas Sauter (2012)
Downloadable (with restrictions)! This paper tests for one mechanism that can explain the existence of a language barrier to trade. Specifically, I ask if those industries that require more cross-border communication in order to export their products trade more between Canadian provinces that know the other's language(s). I find that trade in industries with a need to communicate directly (orally) with importers increases with the probability that people in another province speak the same language. This finding can fill a missing link in the empirical trade literature, which lacked convincing arguments for the observed correlation between language commonality and the total volume of trade.<P>(This abstract was borrowed from another version of this item.)
104. The impact of new borders on trade: World War I and the economic disintegration of Central Europe [31.772%]
Heinemeyer, Hans Christian (2006)
Downloadable! This paper investigates the impact of changes in national border demarcation on economic integration. It treats the national breakups in Central Europe due to WWI as a natural experiment, which allows for evaluating the particular effect of new national borders. A gravity model of trade is used to analyze goods-specific trade among Central European regions. The main results are, first, that the treatment effect of new borders is large. Second, decomposing the border effect provides evidence of a “border before border” for parts of Germany that became separated even before WWI. Third, the analysis indicates a high level of economic integration before WWI among Polish regions that became politically unified only after the war. --
105. The treatment effect of borders on trade. The great war and the disintegration of Central Europe [31.678%]
Hans Christian Heinemeyer (2007)
Downloadable (with restrictions)! This paper investigates the impact of changes in national border demarcation on economic integration. It treats the national breakups in Central Europe due to WWI as a natural experiment. The set-up allows to control for selection bias when estimating the impact of national borders on trade. A gravity model of trade is used to analyze goods-specific trade among Central European regions. The main results are, first, that systematic deviations of the observations under “border treatment” are found. Regions pairs that became separated by a new national border after WWI, tended to have below average levels of economic integration already before the war. A comparison of actual and biased result for goods-specific trade yields a difference of between 21 and 86% ad-valorem tariff equivalent, and might well be higher for certain goods. Second, the analysis indicates that cross-border integration was indeed lower after WWI but that this change was economically significant only for
106. The geography of asset holdings: Evidence from Sweden [31.478%]
Coeurdacier , Nicolas & Martin, Philippe (2007)
Downloadable! This paper analyzes the determinants of cross-border asset holdings on cross-country data and a Swedish data set. We focus our analysis on the effect of the euro not only for the determinants of bond holdings, but also of equity and banking assets. With the help of a simple theoretical model, we attempt to disentangle the different effects that the euro may have had on asset holdings for both euro zone countries and countries outside of the euro zone such as Sweden. We find evidence that the euro has implied 1) a unilateral financial liberalization which makes it cheaper for all countries to buy euro zone assets. For bonds and equity holdings, this would translate into a 14% and 17% decrease in transaction costs. Using Swedish data, we find that the effect is larger for flows than for stocks. 2) a preferential financial liberalization which on top of the previous effect has decreased transaction costs inside the euro zone by 17% and 10% for bonds and equity respectively. 3) a diversion effect du
107. Disintegration and Trade [31.392%]
Jarko Fidrmuc & Jan Fidrmuc (2000)
Downloadable! The gravity model of trade is utilized to assess the impact of disintegration on trade. The analysis is based on three recent disintegration episodes involving the former Soviet Union, Yugoslavia and Czechoslovakia. The results point to a very strong home bias around the time of disintegration, with intra-union trade exceeding normal trade approximately 43 times in the former Soviet Union and Czechoslovakia, and 24 times in the former Yugoslavia. Disintegration was followed by a sharp fall in trade intensity. Nevertheless, there is a considerable hysteresis in economic relations, with trade flows among the former constituent Republics still between two and 30 times greater than normal trade in 1998.
108. Disintegration and Trade [31.390%]
Fidrmuc, Jan & Fidrmuc, Jarko (2000)
Downloadable (with restrictions)! The gravity model of trade is utilized to assess the impact of disintegration on trade. The analysis is based on three recent disintegration episodes involving the former Soviet Union, Yugoslavia and Czechoslovakia. The results point to a very strong home bias around the time of disintegration, with intra-union trade exceeding normal trade approximately 43 times in the former Soviet Union and Czechoslovakia, and 24 times in the former Yugoslavia. Disintegration was followed by a sharp fall in trade intensity. Nevertheless, there is a considerable hysteresis in economic relations, with trade flows among the former constituent Republics still between two and 30 times greater than normal trade in 1998.
109. The border effect in the Japanese market: A Gravity Model analysis [31.379%]
Okubo, Toshihiro (2004)
Downloadable (with restrictions)! This paper uses a Gravity Model to analyze the border effect in the Japanese market, which indicates how biased interregional trade is compared with international trade. The results suggest that the border effect in Japan is much lower than in the United States and Canada, and has declined year by year between 1960 and 1990. Possible reasons for the decline include the reduction of tariff rates and non-tariff barriers, the surge of foreign direct investment, and the appreciation of the yen.<P>(This abstract was borrowed from another version of this item.)
110. Disintegration and Trade [31.326%]
Jarko Fidrmuc & Jan Fidrmuc (2001)
Downloadable! The gravity model of trade is utilized to assess the impact of disintegration on trade. The analysis is based on three recent disintegration episodes involving the former Soviet Union, Yugoslavia and Czechoslovakia. The results point to a very strong home bias around the time of disintegration, with intra-union trade exceeding normal trade approximately 43 times in the former Soviet Union and Czechoslovakia, and 24 times in the former Yugoslavia. Disintegration was followed by a sharp fall in trade intensity. Nevertheless, there is a considerable hysteresis in economic relations, with trade flows among the former constituent Republics still between two and 30 times greater than normal trade in 1998.
111. Market Access in Global and Regional Trade [31.298%]
Soledad Zignago & Thierry Mayer (2005)
Downloadable! This paper develops a method of assessment of market access difficulties with an application to manufactured trade patterns between developing and developed countries. The method also offers a renewal of the assessment of the impact of regional trading arrangements. We use a micro-founded gravity-type model of trade patterns to estimate the impact of national borders on revealed access to Northern markets by Southern producers. This is made possible by the construction and use of a new database. Ceteris paribus, in the nineties, a rich country imports on average 281 times more from itself than from a developing country, only 61 times more when importing from another rich country. Results reveal that those difficulties faced by developing countries’ exporters in accessing developed countries’ consumers are furthermore higher than the reciprocal. Currently, the tariff equivalents of those border effects differ by around 31 percentage points. Those difficulties in Northern market access have ho
112. Market Access in Global and Regional Trade [31.224%]
Thierry Mayer & Soledad Zignago (2005)
Downloadable! This paper develops a method of assessment of market access difficulties with an application to manufactured trade patterns between developing and developed countries. The method also offers a renewal of the assessment of the impact of regional trading arrangements. We use a micro-founded gravity-type model of trade patterns to estimate the impact of national borders on revealed access to Northern markets by Southern producers. This is made possible by the construction and use of a new database. Ceteris paribus, in the nineties, a rich country imports on average 281 times more from itself than from a developing country, only 61 times more when importing from another rich country. Results reveal that those difficulties faced by developing countries’ exporters in accessing developed countries’ consumers are furthermore higher than the reciprocal. Currently, the tariff equivalents of those border effects differ by around 31 percentage points. Those difficulties in Northern market access h
113. Asymmetric Pattern Of Intra-Industry Trade Between The United States And Canada [31.198%]
Kim, MinKyoung & Cho, Guedae & Koo, Won W. (2003)
Downloadable! This study proposes alternative rationales to explain an asymmetric intra-industry trade pattern between the United States and Canada after the free trade agreement became effective. Using time-series data, a gravity equation is developed which enables us to examine the impacts of relative market size, exchange rates, and transportation costs on bilateral trade. It is found that these three effects have to be taken together in order to explain the asymmetric intra-industry trade pattern. Exchange rate impacts on bilateral trade are found to the most significant, indicating that U.S. dollar appreciation causes a more asymmetric trade pattern for agricultural goods than for large-scale manufacturing goods.
114. Trade Potential and Among Indian Ocean Border Countries: Application of the Gravity Model [31.026%]
Hossein Karimi Hosnijeh (2007)
Downloadable! Recent development in the globalization process and interdependence of national economic follow the importance of financial market, economic liberalization policies, technology capital and laber mobility, expansion of consumption market. In this instance, economic integration, expanding trade flows, reduction of barriers and trade constraints are the main activities of national economies. Looking towards to regional union, trade flows, integration could facilitate the process of trade liberalization to help the more cooperation between partners to inter national economics. The propose of this paper is two fold. First examine the succees and failure of the existing preferential trade agreements and regional economic groupings among the IOR-ARC countries. Secondly using the generalized gravity model and panel data during 1999-2004, explains the estimation results. The results show that IOR-ARC potential trade including Iran, while export to others excluding Iran would increase lay 35 percent, woul
115. Integration, Disintegration and Trade in Europe: Evolution of Trade Relations During the 1990s [30.893%]
Jarko Fidrmuc & Jan Fidrmuc (2000)
Downloadable! The gravity model of trade is used to assess the economic consequences of new borders, which arose in the wake of break-ups of multinational federations in Eastern Europe. The intensity of trade relations among the constituent parts of Czechoslovakia, Soviet Union and the Baltics was very high around the time of disintegration, exceeding the normal level of trade approximately 40 times. Disintegration has been followed by a sharp fall in trade intensity. On the other hand, the trade liberalization between East and West has lead to gradual normalization of trade relations, and liberalization within CEFTA has reversed the fall in trade intensity among Central European countries. JEL classification: F13, F15, F41
116. Integration, disintegration and trade in Europe: Evolution of trade relations during the 1990s [30.893%]
Fidrmuc, Jarko & Fidrmuc, Jan (2000)
Downloadable! The gravity model of trade is used to assess the economic consequences of new borders, which arose in the wake of break-ups of multinational federations in Eastern Europe. The intensity of trade relations among the constituent parts of Czechoslovakia, Soviet Union and the Baltics was very high around the time of disintegration, exceeding the normal level of trade approximately 40 times. Disintegration has been followed by a sharp fall in trade intensity. On the other hand, the trade liberalization between East and West has lead to gradual normalization of trade relations, and liberalization within CEFTA has reversed the fall in trade intensity among Central European countries. --
117. Integration, Disintegration and Trade in Europe: Evolution of Trade Relations during the 1990s [30.893%]
Fidrmuc, J. & Fidrmuc, J. (2000)
Downloadable! The gravity model of trade is used to assess the economic consequences of new borders, which arose in the wake of break-ups of multinational federations in Eastern Europe. The intensity of trade relations among the constituent parts of Czechoslovakia, Soviet Union and the Baltics was very high around the time of disintegration, exceeding the normal level of trade approximately 40 times. Disintegration has been followed by a sharp fall in trade intensity. On the other hand, the trade liberalization between East and West has lead to gradual normalization of trade relations, and liberalization within CEFTA has reversed the fall in trade intensity among Central European countries.
118. Cross-Border Trade and FDI in Services [30.807%]
Fillat Castejón, Carmen & Francois, Joseph & Woerz, Julia (2008)
Downloadable (with restrictions)! Working with a panel dataset of of OECD countries over the decade 1994-2004, we examine linkages between cross-border trade and FDI in the service sectors. We first develop a consistent analytical framework for the application of the gravity model jointly to services trade and commercial presence (i.e. FDI), using a composite model of delivery that offers testable hypotheses about the roles of different modes of services supply as complements or substitutes. We further link our estimates to policy variables measuring market regulations that may act directly or implicitly as barriers to trade. We find robust evidence of complementary effects in the short-run, which is reinforced in the long run by an increased potential for cross-border imports based on previous FDI inflows. A detailed analysis by individual service sectors highlights business, communication and financial services as showing the largest potential for cross-border trade when market regulations are reduced and w
119. Trade, Interdependence and Exchange Rates [30.772%]
Fitzgerald, Doireann (2004)
Downloadable! The empirical “gravity†equation is extremely successful in explaining bilateral trade. This paper shows how a multi-country model of specialization and costly trade (i.e. a microfounded gravity model) can be applied to explain empirical exchange rate puzzles. One such puzzle is the fact that nominal exchange rates are enormously volatile, but that this volatility does not appear to affect inflation. The gravity model is very successful in explaining this puzzle. In a sample of 25 OECD countries in the post- Bretton Woods period, the gravity prediction of inflation substantially outperforms the purchasing power parity prediction. The gravity prediction matches the volatility of actual inflation, and tracks its path closely. The superior performance of the gravity prediction is explained primarily by the fact that it takes account of the interaction of specialization with home bias. The stability of inflation in very open economies is explained in addition by the fact that the size of b
120. Trade, Interdependence and Exchange Rates [30.772%]
Fitzgerald, Doireann (2004)
Downloadable! The empirical “gravity†equation is extremely successful in explaining bilateral trade. This paper shows how a multi-country model of specialization and costly trade (i.e. a microfounded gravity model) can be applied to explain empirical exchange rate puzzles. One such puzzle is the fact that nominal exchange rates are enormously volatile, but that this volatility does not appear to affect inflation. The gravity model is very successful in explaining this puzzle. In a sample of 25 OECD countries in the post- Bretton Woods period, the gravity prediction of inflation substantially outperforms the purchasing power parity prediction. The gravity prediction matches the volatility of actual inflation, and tracks its path closely. The superior performance of the gravity prediction is explained primarily by the fact that it takes account of the interaction of specialization with home bias. The stability of inflation in very open economies is explained in addition by the fact that the size of b
121. European Accession And The Trade Facilitation Agenda [30.766%]
John S. Wilson & Xubei Luo & Harry G. Broadman (2010)
Downloadable (with restrictions)! This paper examines the impact of improved trade facilitation measures and institutional capacity in a set of economies in transition Europe. Our results suggest that behind-the-border barriers play an important role in determining bilateral trade flows (controlling for the effects of tariffs, development levels, distance, and regional characteristics of exporters and importers, among other factors). For European Union (EU) members that joined the Union in 2004 and less developed and candidate members raising capacity in port efficiency and information technology infrastructures halfway to the EU-15 average, trade could expand by US$49 billion and US$62 billion respectively. In the context of the economic crisis and fragile recovery, as well as efforts to strengthen Europe integration, efforts to facilitate trade with investments to raise capacity in trade facilitation should be considered as part of policy steps going forward.
122. Gravity model specification and the effects of the Canada-U.S. border [30.608%]
Howard J. Wall (2000)
Downloadable! There is a well-established literature finding that the Canada-U.S. border has a large dampening effect on trade, is asymmetric, and differs across provinces. In this paper, I demonstrate that the standard gravity model used to obtain these results provides biased estimates of the volume of trade. I attribute this to heterogeneity bias and reestimate the effects of the border using a gravity model that allows for heterogeneous gravity equations. Doing so does not alter the general results of existing studies, although it does yield a border effect that is 40 percent larger, reverses the border's asymmetry, and indicates very different provincial effects.
123. Does corruption discourage international trade? [30.292%]
de Jong, Eelke & Bogmans, Christian (2011)
Downloadable (with restrictions)! We use measures of trade-related corruption to investigate the effects of corruption on international trade and compare the results with those of corruption in general. We distinguish corruption in an exporting economy from that in an importing economy. Both distinctions appear to be important. Corruption in general hampers international trade, whereas bribe paying to customs enhances imports. This effect is most robust in importing countries with inefficient customs. High waiting times at the border significantly reduce international trade. The effects of unpredictability of corruption and policies are inconclusive.
124. How Important Are Non-Tariff Barriers to Agricultural Trade within ECOWAS? [29.953%]
Seck, Abdoulaye & Cissokho, Lassana & Makpayo, Kossi & Haughton, Jonathan (2010)
Downloadable! It is widely believed that the countries of Africa trade relatively little with the outside world, and among themselves, despite an extensive network of regional trade agreements. We examine this proposition by focusing on agricultural trade. Specifically, we ask whether non-tariff barriers (NTBs) are stunting agricultural trade within ECOWAS, a grouping of 15 countries in West Africa that has removed tariffs on agricultural trade among its members. Our survey of truckers in Tambacounda (Senegal) in August 2009 found evidence of extensive bribery by police and border officials, effectively representing a barrier to trading.
125. Has the border narrowed? [29.879%]
Janet Ceglowski (1998)
In the late 1980s, Canada's provinces traded 20 times more with one another than with U.S. states of comparable size and distance. In other words, the Canada-U.S. border exerted a strong effect on the pattern of Canada's continental trade patterns. Since then, globalization and the formation of the Canada-U.S. and North American free trade areas could have reduced the impact of the border on continental trade patterns. However, estimates from a gravity model of aggregate Canadian trade reveal no evidence of a narrowing border, at least through 1996. The border effect appears remarkably stable both over time and across equation specifications.
126. The effects of multinational activities on the measurement of home bias [29.629%]
Ghazalian, Pascal L. & Furtan, W. Hartley (2008)
Downloadable (with restrictions)! Foreign products reach domestic consumers via cross-border trade and by the production of foreign affiliates of multinational enterprises. The conventional measurement of home bias in consumption of national products relative to foreign products does not recognize the role of multinational activities. In this paper, a gravity-based model that accounts for trade and the operation of foreign affiliates as alternative channels of accessing foreign markets is derived. This gravity-based model is used to theoretically demonstrate that disregarding the activities of multinational enterprises leads to an upward bias in the measurement of home bias. Our empirical application is conducted on a subset of OECD countries in the manufacturing sector. The benchmark results indicate that home bias is overstated by a factor of 1.7 when disregarding the multinational activities. J. Japanese Int. Economies 22 (3) (2008) 401-416.
127. Trade integration in manufacturing: the Chilean experience [29.629%]
Maria Bas & Ivan Ledezma (2007)
Downloadable! Using bilateral trade flow data from 1979 to 1999, we estimate trade integration between Chile and its principal trading partners during the period (European Union, United States and Latin America). Our estimates are based on a gravity specification, theoretically grounded on a monopolistic competition framework with increasing returns. Trade barriers are measured following the border effect methodology by comparing inter-national imports to intra-national ones. Our results are consistent with the agenda of trade integration followed by Chile. Moreover, trade integration turns out to be heterogeneous across industries and over the time. We also find asymmetries between export and import oriented policies as well as between partners. All these features are usually missing when one uses direct measures of trade policies.
128. Gravity with Gravitas: A Solution to the Border Puzzle [29.528%]
James E. Anderson & Eric van Wincoop (2001)
Downloadable! The gravity model has been widely used to infer substantial trade flow effects of institutions such as customs unions and exchange rate mechanisms. McCallum [1995] found that the US-Canada border led to trade between provinces that is a factor 22 (2,200%) times trade between states and provinces, a spectacular puzzle in light of the low formal barriers on this border. We show that the gravity model usually estimated does not correspond to the theory behind it. We solve the 'border puzzle' by applying the theory seriously. We find that national borders reduce trade between the US and Canada by about 44%, while reducing trade among other industrialized countries by about 30%. McCallum's spectacular headline number is the result of a combination of omitted variables bias and the small size of the Canadian economy. Within-Canada trade rises by a factor 6 due to the border. In contrast, within-US trade rises 25%.
129. Comércio Internacional X Intranacional No Brasil: Medindo O Efeito-Fronteira [29.469%]
Silva, Orlando Monteiro Da & Almeida, Fernanda Maria & Oliveira, Bethania Moreira (2007)
Downloadable! Neste artigo, analisou-se, para o mercado brasileiro, o efeito-fronteira, que indica o viés do comércio doméstico em comparação com o comércio internacional. Esse efeito foi estimado empiricamente, utilizando-se dados de corte seccional, em um modelo de gravidade com os 26 estados brasileiros mais o Distrito Federal e 40 países. Apesar de o Brasil estar reduzindo as barreiras ao comércio internacional, o efeito-fronteira calculado mostrou-se ainda muito alto para os padrões conhecidos. O valor encontrado para o viés entre os estados brasileiros foi igual a 33, evidenciando-se que eles comercializam 33 vezes mais entre si do que com os países estrangeiros. Em um país em desenvolvimento como o Brasil, as conseqüências desse viés, em termos de bem-estar, provavelmente sejam muito grandes. A magnitude do efeito-fronteira pode ser explicada pelo baixo grau de substituição entre os produtos domésticos e estrangeiros e, também, pelas grandes barreiras ao comércio internacional. ----
130. Regionalization and home bias: the case of Canada [29.436%]
Janet Ceglowski (1998)
The bilateral trade flows between Canada and the U.S. are the world's largest and have grown rapidly in the 1990s. Are they evidence of a North American trading bloc? A gravity model of trade finds that while economic size and proximity can explain much of the substantial trade between Canada and the U.S., Canada's merchandise trade exhibits a significant U.S. bias. The model also reveals that trade between Canada's provinces is 31 times that between a province and a country other than the U.S., significantly higher than estimates of Canada's home bias relative to the U.S.
131. Cross-Border Mergers & Acquisitions and the Role of Trade Costs [29.254%]
Görg, Holger & Hijzen, Alexander & Manchin, Miriam (2007)
Downloadable (with restrictions)! Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in the number of cross-border mergers and acquisitions. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether trade costs affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.
132. The Gravity Model in International Trade [28.740%]
(2010)
How do borders affect trade? Are cultural and institutional differences important for trade? Is environmental policy relevant to trade? How does one's income or wage relate to the fact that trade partners are nearby or far away? These are just some of the important questions that can be answered using the gravity model of international trade. This model predicts and explains bilateral trade flows in terms of the economic size and distance between trading partners (e.g. states, regions, countries, trading blocs). In recent years, there has been a surge of interest in this model and it is now one of the most widely applied tools in applied international economics. This book traces the history of the gravity model and takes stock of recent methodological and theoretical advances, including new approximations for multilateral trade resistance, insightful analyses of the measurement of economic distance and analyses of foreign direct investment.
133. Was Germany ever united? Evidence from Intra- and International Trade 1885 – 1933 [28.299%]
Wolf, Nikolaus (2008)
Downloadable! When did Germany become economically integrated? Within the framework of a gravity model, based on a new data set of about 40,000 observations on trade flows within and across the borders of Germany over the period 1885 – 1933, I explore the geography of trade costs across Central Europe. There are three key results. First, the German Empire before 1914 was a poorly integrated economy, both relative to integration across the borders of the German state and in absolute terms. Second, this internal fragmentation resulted from cultural heterogeneity, from administrative borders within Germany, and from geographical barriers that divided Germany along natural trade routes into eastern and western parts. Third, internal integration improved, while external integration worsened after World War I and again with the Great Depression, in part because of border changes along the lines of ethno-linguistic heterogeneity. By the end of the Weimar Republic in 1933, Germany was reasonably well integrated.
134. Was Germany ever United? Evidence from Intra- and International Trade 1885 - 1933 [28.299%]
Nikolaus Wolf (2008)
Downloadable! When did Germany become economically integrated? Within the framework of a gravity model, based on a new data set of about 40,000 observations on trade flows within and across the borders of Germany over the period 1885 – 1933, I explore the geography of trade costs across Central Europe. There are three key results. First, the German Empire before 1914 was a poorly integrated economy, both relative to integration across the borders of the German state and in absolute terms. Second, this internal fragmentation resulted from cultural heterogeneity, from administrative borders within Germany, and from geographical barriers that divided Germany along natural trade routes into eastern and western parts. Third, internal integration improved, while external integration worsened after World War I and again with the Great Depression, in part because of border changes along the lines of ethno-linguistic heterogeneity. By the end of the Weimar Republic in 1933, Germany was reasonably well integrated.
135. Market access asymmetry in food trade [28.172%]
Alessandro Olper & Valentina Raimondi (2007)
Downloadable! Using a bilateral trade equation derived from a monopolistic competition model, we investigated market access reciprocity in food trade among the US, Canada, the EU and Japan. We explore country and industry-specific market access asymmetry through the border effect approach, re-challenging the underlying main explanations. Our findings reveal marked asymmetry in reciprocal trade openness; indeed, access to the food markets of the US and Japan appears significantly easier than reciprocal access to both Canada and, especially, the EU. Policy trade barriers, firstly in the forms of NTBs, the degree of product differentiation and `home bias?in preferences, are all important factors in explaining border effects. Moreover, several stylized facts suggest that border effect interpretation should also be based on political economy arguments.
136. Border Effect Estimates for France and Germany Combining International Trade and Intranational Transport Flows [28.163%]
Matthias Helble (2007)
Downloadable (with restrictions)! Since the seminal contribution of McCallum (1995) economists have tried to estimate the border effect for other countries than the US and Canada, but have been confronted with a key data problem: data on regional trade flows are extremely rare. The different approaches put forward to overcome this lack of information have been shown to hinge crucially on certain distance measures. The main purpose of this paper is to develop a method that allows us determining border effects with a high degree of accuracy in the absence of intra-national trade data. We show how to improve the estimation of border effects at the example of France and Germany using data on regional transportation flows. Our results indicate that France trades about eight times more and Germany about three times more with itself than with other EU countries compared to the predictions of the gravity equation.<P>(This abstract was borrowed from another version of this item.)
137. Do state borders matter for U.S. intranational trade? The role of history and internal migration [28.103%]
Daniel L. Millimet & Thomas Osang (2007)
Downloadable (with restrictions)! Empirical evidence of the impact of borders on international trade flows using the gravity equation approach abounds. This paper examines the empirical relevance of state borders in U.S. interstate trade for various specifications of the gravity equation. We find a large and economically significant subnational border effect for some specifications. However, two model specifications drastically reduce (if not eliminate) the border effect: (i) dynamic panel specifications controlling for past levels of trade and (ii) models conditioning on internal migration.
138. The geography of trade in goods and asset holdings [27.825%]
Antonin Aviat & Nicolas Coeurdacier (2007)
Downloadable! Gravity models have been widely used to describe bilateral trade in goods. Portes and Rey [Portes, R., Rey, H., 2005. The Determinants of Cross-Border Equity Flows. Journal of International Economics, 65(2), 269–296.] applied this framework to cross-border equity flows and found that distance, which proxies information asymmetries, is a surprisingly very large barrier to cross-border asset trade. We adopt a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings in a simultaneous gravity equations framework. Providing different instruments for both endogenous variables, we show that a 10% increase in bilateral trade raises bilateral asset holdings by 6% to 7%. The reverse causality is also significant, albeit smaller. Controlling for trade, the impact of distance on asset holdings is drastically reduced. Keywords: Gravity models; International finance; International trade; Simultaneous equations
139. Borders, Trade and Welfare [27.674%]
James E. Anderson & Eric van Wincoop (2001)
Downloadable! International economic integration yields large potential welfare effects, even in a static constant returns competitive world economy. Our method is novel. The effect of border barriers on trade flows is often inferred from gravity models. But their rather atheoretic structure precludes welfare analysis. Computable general equilibrium models are designed for tight welfare analysis, but lack econometric foundation. Our method combines these approaches. Gravity models based on Anderson's (1979) interpretation are full general equilibrium models of a special simple sort. In Anderson and van Wincoop (NBER WP 8079, 2001) we develop and estimate this structure, then calculate the comparative static effects on trade flows of border barriers. In this paper we further deploy the model to explore the comparative statics of welfare with respect to borders, to currency unions and to NAFTA. Our NAFTA exercise does a much better job of replicating the actual trade flow changes than do computable general equi
140. Integrating Landlocked Developing Countires into international trading system through trade facilitaion [27.614%]
Paras Kharel & Anil Belbase (2010)
Downloadable! This study empirically investigates how the quality of trade facilitation (both on-theborder and behind-the-border factors) in landlocked developing countries (LLDCs) and in their transit countries impacts LLDC trade. It uses an augmented gravity model incorporating trade facilitation variables.
141. The Geography of Trade in Goods and Asset Holdings [27.449%]
Aviat, Antonin & Coeurdacier, Nicolas (2006)
Downloadable! Gravity models have been widely used to describe bilateral trade in goods. Recently, Portes and Rey [1999] applied this framework to cross border equity flows and found that distance, which proxies information asymmetries in financial markets, is a surprisingly very large barrier to cross-border asset trade. We adopt here a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings. We jointly study trade in goods and banking assets in a simultaneous gravity equations framework using different instruments for both endogenous variables. To instrument trade in goods, we choose geographical variables (excluding distance) and data on bilateral transport costs. For asset holdings, we use legal similarities between countries and data on the international taxation of withheld capital. We find that the strong correlation between bilateral trade in goods and asset holdings is not simply due to distance: bilateral trade in goods generates bilatera
142. Trade and African Regional Agreements: a spatial econometric approach [27.394%]
Aligui TIENTAO & Diègo LEGROS & Wilfried KOCH (2012)
Downloadable! (VF)L’objet de cette étude est d'évaluer l'impact des blocs régionaux africains sur les flux commerciaux, tout en prenant en compte l'interdépendance spatiale entre ces flux. À cet effet, nous dérivons une équation de gravité spatiale en relâchant l'hypothèse implicite que les flux commerciaux entre deux partenaires sont indépendants de ce qui se passe dans le reste du monde. Nous estimons les effets frontières pour six blocs régionaux en Afrique (CEMAC, COMESA, CEDEAO, SADC, UEMOA et la zone FRANC). Nos résultats montrent qu’excepté la zone FRANC et la CEDEAO, tous les autres blocs ont produit des effets positifs sur les flux commerciaux. Cependant, ces effets sont faibles sauf pour l'UEMOA et la CEMAC. En outre, l'interdépendance spatiale entre les flux commerciaux s’est traduite par une relation négative comme l'implique le modèle théorique, ce qui suggère une mesure naturelle de la concurrence spatiale. (VA)The purpose of this paper is to evaluate the impact of Afri
143. Does trade creation by social and business networks hold in services? An analysis for Accommodation and Restaurants in Spain [27.328%]
de la Mata, Tamara (2011)
Downloadable! Recent literature on the border effect fostered research on informal barriers to trade and the role of networks promoting it. In relation to social networks, it has been shown that the intensity of trade of goods is positively correlated with the migration flows between any pair of countries/regions. In this article it is investigated if such a relation also holds for the Spanish domestic trade flows of services. With this aim, a gravity model rooted in the Dixit–Stiglitz–Krugman theoretical frameworks is used taking advantage of a unique dataset on interregional trade flows of some of the main sectors linked to Tourism, namely, Accommodation and Restaurants. A different analysis of each sector separately is carried out, finding a big positive effect for Restaurants, but no effect for the Hostel industry. These novel results can be explained by forces driving the demand in each sector. Migration linkages are measured by means of Register data, regarding the stock of people born in each regio
144. Market Access Asymmetry in Food Trade [27.284%]
Alessandro Olper & Valentina Raimondi (2008)
Downloadable (with restrictions)! Using a bilateral trade equation derived from a monopolistic competition model, we investigated market access reciprocity in food trade among the US, Canada, the EU and Japan. We explore country and industry-specific market access asymmetry through the border effect approach, re-challenging the underlying main explanations. Our findings reveal marked asymmetry in reciprocal trade openness; indeed, access to the food markets of the US and Japan appears significantly easier than reciprocal access to both Canada and, especially, the EU. Policy trade barriers, firstly in the forms of NTBs, the degree of product differentiation and `home bias?in preferences, are all important factors in explaining border effects. Moreover, several stylized facts suggest that border effect interpretation should also be based on political economy arguments.<P>(This abstract was borrowed from another version of this item.)
145. Impact of Cross-border Road Infrastructure on Trade and Investment in the Greater Mekong Subregion [27.268%]
Christopher Edmonds & Manuba Fujimura (2006)
Downloadable! This paper investigates the impact of cross-border road infrastructure on trade and foreign direct investment in the Greater Mekong Subregion using panel data from 1981 to 2003. Empirical analysis based on a gravity-model approach suggests that the development of cross-border road infrastructure has had a positive effect on intra-regional trade in major commodities with its elasticity in the range of 0.6-1.4. When the impact of domestic road infrastructure is assessed separately, it has been associated with increased trade. When cross-border and domestic road infrastructure are considered together, the former has had a positive and the latter has had a negative association, respectively, with trade. Results regarding the impact of road infrastructure on FDI flows are ambiguous, although data limitations appear to have attributed to the poor performance of these estimates. This paper was presented at the 3rd Annual Latin America/Caribbean and Asia/Pacific Economics and Business Association (LAEBA
146. Cross-Border Trade and FDI in Services [27.162%]
Carmen Fillat-Castejón & Joseph F. Francois & Julia Wörz (2009)
Downloadable! Working with a panel dataset of OECD countries over the decade 1994-2004, we examine linkages between cross-border trade and FDI in the services sectors. We first develop a consistent analytical framework for the application of the gravity model to both services trade and commercial presence (i.e. FDI), using a composite model of delivery that offers testable hypotheses about the roles of different modes of services supply as complements or substitutes. We further link our estimates to policy variables measuring market regulations that may act directly or implicitly as barriers to trade. We find robust evidence of complementary effects in the short run, which is reinforced in the long run by an increased potential for cross-border imports based on previous FDI inflows. A detailed analysis by individual services sectors highlights business, communication and financial services as showing the largest potential for cross-border trade when market regulations are reduced and when commercial presence
147. Cross-Border Trade and FDI in Services [27.161%]
Carmen Fillat-Castejon & Joseph Francis Francois & Julia Maria Woerz (2008)
Downloadable! Working with a panel dataset of of OECD countries over the decade 1994-2004, we examine linkages between cross-border trade and FDI in the service sectors. We first develop a consistent analytical framework for the application of the gravity model jointly to services trade and commercial presence (i.e. FDI), using a composite model of delivery that offers testable hypotheses about the roles of different modes of services supply as complements or substitutes. We further link our estimates to policy variables measuring market regulations that may act directly or implicitly as barriers to trade. We find robust evidence of complementary effects in the short-run, which is reinforced in the long run by an increased potential for cross-border imports based on previous FDI inflows. A detailed analysis by individual service sectors highlights business, communication and financial services as showing the largest potential for cross-border trade when market regulations are reduced and when commercial prese
148. Market Access in Global and Regional Trade [27.161%]
de Sousa, José & Mayer, Thierry & Zignago, Soledad (2012)
Downloadable (with restrictions)! This paper develops a method to measure difficulties in market access over a large set of industries and countries (both developing and developed), during the period 1980-2006. We use a micro-founded heterogeneous-consumers model to estimate the impact of national borders on global and regional trade flows. Results show that difficulties faced by developing countries' exporters in accessing developed markets are 50\% higher than those faced by Northern exporters. These difficulties have however experienced a noticeable fall since 1980 in all industries. It is twenty three times easier to enter Northern and Southern markets for a Southern country exporter in 2006 than in 1980. Expressed in tariff-equivalent, the level of protection implied when crossing a border fell from 180 to 89\% for this same sample. While tariffs still have an influence on trade patterns, they do not seem to explain an important part of the border effect. Last, our theory-based measure offers a renewal o
149. Cross-border mergers and acquisitions and the role of trade costs [27.131%]
Alexander Hijzen & Holger G�rg & Miriam Manchin (2006)
Downloadable! Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in both the number and the value of cross-border mergers and acquisitions. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether distance and trade policy barriers affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.
150. Shake Hands or Shake Apart? International Relationship of Japan with Global Blocs [26.905%]
Toshihiro Okubo (2008)
Downloadable! Despite the world-wide spread of economic blocs following the Great Depression, Japan sought to find trade partners outside of its own bloc and to maintain a relationship with some foreign blocs, in particular maintaining a connection with the British Commonwealth and the Sterling bloc. The 1930s bloc economies did not isolate Japan. Also, in the early period of the cold war after World War II, capitalist blocs did not significantly isolate Japan. Econometric analysis of Japan’s trade and world trade over the period from 1890 to 1955 based on a development of a gravity equation illustrates these statements.
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Search for (border | home bias) trade gravity. Search results: border : 12780, bordering : 173, borderings : 0, bordered : 36, borderer : 0, borders : 3259, home : 24195, homely : 0, homing : 97, homed : 3, homer : 76, homers : 2, homes : 2417, bias : 28993, biasing : 197, biased : 8294, biases : 5325, biasness : 12, trade : 188418, trading : 36145, traded : 7679, trader : 1442, traders : 6966, trades : 4300, gravity : 5790, gravities : 1. Results 151-200 of 370. Search took 1.635 seconds
151. Measuring network effects on trade: A reexamination [26.697%]
Greaney, Theresa M. (2009)
Downloadable (with restrictions)! Building upon [Greaney, T.M., 2005. Measuring network effects on trade: are Japanese affiliates distinctive? Journal of the Japanese and International Economies 19, 194-214], this research provides improved estimates of the impact of network effects on trade conducted by foreign affiliates operating in the US. With an expanded and improved data set, I find that both home and regional biases are much stronger for affiliates' imports than for their exports. At the country-specific level, I find evidence to support the hypothesis that Japanese affiliates have particularly strong network effects, but these effects are limited to a home bias effect alone. Although Japanese affiliates show signs of a regional, or Asian, network effect in their import pattern, the strength of this effect is the weakest among all of the countries tested. Only two countries' affiliates show signs of regional bias in their export behavior, Australia and the Netherlands.
152. Trade Integration in Manufacturing : The Chilean Experience [26.653%]
Bas, Maria & Ledezma, Ivan (2009)
Downloadable! Using bilateral trade flow data from 1979 to 1999, we estimate trade integration between Chile and its principal trading partners during the period (European Union, United States and Latin America). Our estimates are based on a gravity speci cation, theoretically grounded on a monopolistic competition framework with increasing returns. Trade barriers are measured following the border e ect methodology by comparing inter-national imports to intra-national ones. Our results are consistent with the agenda of trade integration followed by Chile. Moreover, trade integration turns out to be heterogeneous across industries and over the time. We also fi nd asymmetries between export and import oriented policies. All these features are usually missing when one uses direct measures of trade policies.
153. National Security and International Trade [26.559%]
Heejoon Kang & Michele Fratianni (2004)
The September 11, 2001 terrorist attack to the twin towers and ensuing heightened national security measures worldwide, but particularly in the United States, are modeled to be equivalent to a thickening of trade barriers in international trade. By estimating a gravity model with a stochastic frontier technique, an effective trade barrier is quantified by “trade inefficiency,†that is by the difference between potential trade and actual trade; this is done both for country pairs and for a given country vis-à -vis all of its trading partners. The impact of higher security levels on trade is examined through hypothetical increases in border thickness, for given values of control variables
154. Trade Policy, Trade Costs, and Developing Country Trade [26.518%]
Hoekman , Bernard & Nicita, Alessandro (2008)
Downloadable! This paper briefly reviews new indices of trade restrictiveness and trade facilitation that have been developed at the World Bank. The paper also compares the trade impact of different types of trade restrictions applied at the border with the effects of domestic policies that affect trade costs. Based on a gravity regression framework, the analysis suggests that tariffs and non-tariff measures continue to be a significant source of trade restrictiveness for low-income countries despite preferential access programs. This is because the value of trade preferences is quite limited: a new measure of the relative preference margin developed in the paper reveals that this is very low for most country-pairs. Most countries with very good (duty-free) access to a market generally have competitors that have the same degree of access. The empirical analysis suggests that measures to improve logistics performance and facilitate trade are likely to have the greatest positive effects in expanding developing
155. The pecking order of cross-border investment [26.325%]
Daude, Christian & Fratzscher, Marcel (2006)
Downloadable! Is there a pecking order of cross-border investment in that countries become financially integrated primarily through some types of investment rather than others? Using a novel database of bilateral capital stocks for all types of investment – FDI, portfolio equity securities, debt securities as well as loans – for a broad set of 77 countries, we show that such a pecking order indeed exists. Motivated by the theoretical work on the capital structure of firms, the paper focuses on two key determinants of this pecking order: information frictions and the quality of host country institutions. Overall, we find that in particular FDI, and to some extent also loans, are substantially more sensitive to information frictions than investment in portfolio equity and debt securities. We also show that the share as well as the size of FDI that a country receive are largely insensitive to institutional factors in host countries, while portfolio investment is by far the most sensitive to the quality of in
156. Uunderstanding the benefits of regional integration to trade : the application of a gravity model to the case of Central America [26.141%]
Gordillo, Darwin Marcelo & Stokenberga, Aiga & Schwartz, Jordan (2010)
Downloadable! The paper identifies the impact of physical barriers to trade within Central America through the use of an augmented and partially constrained Gravity Model of Trade. Adjusting the Euclidian distance factor for Central America by real average transport times, the model quantifies the impact of poor connectivity and border frictions on the region's internal trade as well as its trade with external partners, such as the United States and Europe. In addition, the authors benchmark Central America's trade coefficients against those of a physically integrated region by running a parallel Gravity Model for the 15 core countries of the European Union. This allows for the estimation of potential intra-regional and external trade levels if Central America were to reduce border frictions and time of travel between countries and thus benefit from both the adjacency of each country's neighbors and the gravitational pull of the region's economies. The analysis is conducted for all of Central America's trade
157. CEECS integration into regional production networks. Trade effects of EU-accesion [26.068%]
Inmaculada Martínez-Zarzoso & Anca M. Voicu & Martina Vidovic (2012)
Downloadable! We estimate a gravity model that incorporates the extensive margin of trade and accounts for firm heterogeneity to evaluate the effect of the EU-accession on CEECs trade in intermediates and final goods for the period 1999-2009. The importance of production networks is captured by including imports of intermediates as a determinant of a country’s exports of final goods. We find a positive and significant effect of the EU-accession on CEECs trade in intermediate and final goods. Hence, the elimination of “behind the bordertrade barriers has a positive impact on increasing not only trade volumes but also trade varieties.
158. Intra-European Trade of Manufacturing Goods: An Extension of the Gravity Model [26.060%]
Mark Vancauteren & Daniel Weiserbs (2011)
Downloadable! In this paper, we propose and test several extensions of the standard gravity model. This yields a specification that allows for (i) a more flexible income response; (ii) a competitiveness effect with a general and a specific component; and (iii) an alternative and consistent measure of remoteness. Those extensions were found to be significant factors to explain intra-EU trade. Next, we analyze the effect of EU harmonization of technical regulations on domestic and intra-EU trade. We find, at different levels of aggregation of the manufacturing sector, that harmonization of regulations has contributed to more intra-EU trade but, apparently, did not affect the so called border effect.
159. CEECs Integration into Regional Production Networks. Trade Effects of EU-Accession [26.028%]
Martínez-Zarzoso, Inmaculada & Voicu, Anca M. & Vidovic, Martina (2011)
Downloadable! This paper examines the effect of the two most recent European Union enlargements on CEECs trade of intermediate and final products separately. A theoretically justified gravity model which incorporates the extensive margin of trade and accounts for firm heterogeneity is estimated using highly disaggregated trade data for the period 1999 to 2009. We hypothesize that the CEECs have a comparative advantage on the assembly of final goods and evaluate the effect of the EU-accession on CEECs imports in intermediates products and on CEECs export of final goods to OECD countries. To capture the importance of production networks, imported intermediate products from the OECD are added as a determinant of the corresponding exports of final goods. We find a positive and significant effect of accession on CEECs trade of intermediate and final goods. In particular, deeper integration and the consequent elimination of behind the border trade barriers have had a positive impact not only in terms of increasing
160. Putting Per-Capita Income back into Trade Theory [25.942%]
Markusen, James R. (2010)
Downloadable (with restrictions)! A major role for per-capita income in international trade, as opposed to simply country size, was persuasively advanced by Linder (1961). Yet this crucial element of Linder’s story was abandon by most later trade economists in favor of the analytically-tractable but counter-empirical assumption that all countries share identical and homothetic preferences. This paper collects and unifies a number of disjoint points in the existing literature and builds further on them using simple and tractable alternative preferences. Adding non-homothetic preferences to a traditional models helps explain such diverse phenomenon as growing wage gaps, the mystery of the missing trade, home bias in consumption, and the role of intra-country income distribution, solely from the demand side of general equilibrium. With imperfect competition, we can explain higher markups and higher price levels in higher per-capita income countries, and the puzzle that gravity equations show a positive depende
161. The Determinants of Cross-Border Equity Flows [25.890%]
Portes, Richard & Rey, Hélène (1999)
Downloadable (with restrictions)! We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information heavily determines the pattern of international transactions. Our model integrates elements of the finance literature on portfolio composition and the international macroeconomics and asset trade literature. Gross asset flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. The resulting augmented 'gravity' equation has equity market capitalisation representing market size and distance proxying some informational asymmetries, as well as a variable representing openness of each economy. But other variables explicitly represent information transmission (telephone call traffic and multinational bank branches), an information asym
162. The Determinants Of Cross-Border Equity Flows [25.890%]
R Portes & H Rey (2000)
Downloadable! We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information heavily determines the pattern of international transactions. Our model integrates elements of the finance literature on portfolio composition and the international macroeconomics and asset trade literature. Gross asset flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. The resulting augmented 'gravity' equation has equity market capitalisation representing market size and distance proxying some informational asymmetries, as well as a variable representing openness of each economy. But other variables explicitly represent information transmission (telephone call traffic and multinational bank branches), an information asymmetry between domest
163. Whither Sub-Regional Cooperation? The CLMV Perspective [25.831%]
Evelyn S. Devadason (2013)
Downloadable! Recent debates advocate that closer sub-regional cooperation may be an excellent start to stronger regional cooperation. The study investigates this proposition for the case of CLMV countries that remain less integrated into the ASEAN region, based on their trade links with China. In this respect, the China-CLMV trade flows are examined, prior to detailing the role of China as a core trading partner to CLMV, within the context of intra-ASEAN regionaland intra-GMS sub-regional synergies. The study points out that overall, the CLMV trade relations with China remain unbalanced in terms of volume and structure of trade. Nevertheless, sub-regional membership of CLMV in the GMS is found to be relevant for deepening China-CLMV trade ties for two reasons. First, China plays a greater catalytic role, along the dimension of an export destination, in enhancing intra-GMS trade relative to intra-ASEAN trade. Second, common border effects are found to be significant only for sub-regional trade, consistent wit
164. Intra-national versus International Trade in the European Union: Why do National Borders Matter? [25.715%]
Chen, Natalie (2002)
Downloadable (with restrictions)! Based on the estimation of a theoretically consistent gravity equation, together with a careful computation of transportation costs across countries and industries, the Paper first provides estimates of ‘border effects’ among EU countries. The second objective is to examine the reasons for border effects. Contrarily to the previous findings reported in the literature, we show that national trade barriers do provide an explanation. In particular, technical barriers to trade, together with firm and product-specific information costs, increase border effects, whereas non-tariff barriers are not significant. Our results however suggest that these barriers are not the only cause since the spatial clustering of firms is also shown to matter.
165. Impediments to trade across the Green Line in Cyprus [25.595%]
Omer Gokcekus & Jessica Henson & Dennis Nottebaum & Anthony Wanis-St John (2012)
Downloadable! Cyprus is a divided island. Despite the lack of a comprehensive peace agreement reunifying the country, in 2004 trade commenced across the Green Line that separates the Greek and Turkish Cypriot communities. The volume of trade has grown steadily since, but has it reached its full potential? First, a gravity equation is estimated by using an ‘out-of-sample’ estimation strategy to predict potential trade for the period from 2004 to 2009. We observe a sizable gap between potential and actual volumes of trade. We then attempt to account for this gap by analyzing economic, legal, and social-psychological barriers that can explain this difference. It is found that (1) actual trade has only reached around 10% of its potential, with (2) legal constraints accounting for 35% of the missing trade, (3) extra transportation costs for about 5%, and (4) unmeasurable and social-psychological barriers for a significant amount of between 48% and 60%, depending on the year. The findings suggest that
166. Agricultural market integration in the OECD: A gravity-border effect approach [25.477%]
Olper, Alessandro & Raimondi, Valentina (2008)
Downloadable (with restrictions)! This paper uses the border effect estimate from a gravity model to assess the level of agricultural market trade integration among 22 OECD countries for the 1994-2003 period. Empirical analysis confirms that the use of a gravity equation derived from theory, in the estimation of border effect, matters. A representative estimate of the border effect shows that crossing a national border within the OECD induces an average trade-reduction effect of a factor 13. This average value masks differences that are quite substantial in market integration, with value for intra-EU trade being higher while that for trade between the Central and Eastern European Countries (CEECs) is lower. The data show a process of strong integration in all the country-trade combinations involving CEECs. However, quite surprisingly, the intra-CEEC and OECD-CEEC integration processes are almost twice as strong as those in the EU-CEEC combination. Finally, the equivalent tariffs implied by the estimated borde
167. The Gravity Model: An Illustration Of Structural Estimation As Calibration [25.348%]
Edward J. Balistreri & Russell H. Hillberry (2008)
Downloadable (with restrictions)! "Dawkins, Srinivasan, and Whalley ("Calibration,""Handbook of Econometrics, "2001) propose that estimation is calibration. We illustrate their point by examining a leading econometric application in the study of international and interregional trade by Anderson and van Wincoop ("Gravity with Gravitas: A Solution to the Border Puzzle,""American Economic Review, "2003). We replicate the econometric process and show it to be a calibration of a general equilibrium model. Our approach offers unique insights into structural estimation, and we highlight the importance of traditional calibration considerations when one uses econometric techniques to calibrate a model for comparative policy analysis. "("JEL "F10, C13, C60) Copyright (c) 2007 Western Economic Association International.
168. Road Connectivity and the Border Effect: Evidence from Europe [25.186%]
Mauro Pisu & Henrik Braconier (2013)
Downloadable! Several studies have reported a large negative effect of national borders on the volume of trade. We provide new estimates of the border effect for continental Europe using road rather than great circle – or “as-crows-fly” – distance. Road distances for 48 180 European city pairs have been extracted from Bing Maps Routing Services. As our dataset also has information on travel time, we are able to consider costs related to time in addition to those depending on distance. We find that for the same great circle distance and the same city size, the road distance between two cities located in the same country is around 10% shorter than that between cities located in different ones. Travel speed is also higher between cities in the same country. We find that by using measures based on the actual road distance rather than the great circle distance, the negative effect of international borders on goods trade in a standard gravity equation is lowered by around 15%. Time-related trade costs accou
169. Gravity, Scale and Exchange Rates [25.176%]
James E. Anderson & Mykyta Vesselovsky & Yoto V. Yotov (2013)
Downloadable (with restrictions)! We develop a structural gravity model that introduces scale effects in bilateral trade. Scale effects and incomplete passthrough give two channels through which exchange rates have real effects on trade patterns. Estimates from Canadian provincial trade data identify these effects through their interaction with the US border. We find statistically and quantitatively significant economies of scale in cross-border trade in almost 2/3 of sectors. Real effects of exchange rate changes on trade are found for 12 of 19 goods sectors and none of 9 services sectors.
170. Trade, Wages, and Productivity [25.137%]
Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Suedekum (2012)
Downloadable! We develop a new general equilibrium monopolistic competition model with variable demand elasticity, heterogeneous firms, and multiple asymmetric regions. Wages, productivity, consumption diversity, and markups across firms and markets are all endogenously determined and respond to trade integration in a way that is consistent with empirical evidence. Using Canada-US regional data, we structurally estimate the model and simulate the impacts of removing all trade barriers generated by the Canada-US border. We find that Canadian average labor productivity increases by 8.03%, whereas US average labor productivity rises by just 1.02%. Consumers’ exposure to market power falls sizably by up to 12.11% in the Canadian provinces, and by up to 2.82% in the US states. At the firm level, however, markup changes are ambiguous and depend on the firm’s productivity and location. Our results suggest that markups on the firms’ side provide a very different piece of information than markups on the consumer
171. National Borders, Trade and Migration [25.117%]
John F. Helliwell (1999)
Downloadable! The paper first extends and reconciles recent estimates of the strikingly large effect of national borders on trade patterns. Estimates comparing trade among Canadian provinces with that between Canadian provinces and U.S. states show interprovincial trade in 1988-90 to have been more than twenty times as dense as that between provinces and states, with some evidence of a downward trend since, due to the post-FTA growth in trade between Canada and the United States. Using approximate data for the volumes and distances of internal trade in OECD countries, the 1988-92 border effect for unrelated OECD countries is estimated to exceed 12. Both types of data confirm substantial border effects, even after accounting for common borders and language, with the directly-measured data for interprovincial and province-state trade producing higher estimates." Initial estimates from a census-based gravity model of interprovincial and international migration show a much higher border effect for migration,
172. Border Effect Estimates for France and Germany Combining International Trade and Intra-national Transport Flows [25.040%]
Matthias Helble (2006)
Downloadable! Since the seminal contribution of McCallum (1995) economists have tried to estimate the border effect for other countries than the US and Canada, but have been confronted with a key data problem: data on regional trade flows are extremely rare. The different approaches put forward to overcome this lack of information have been shown to hinge crucially on certain distance measures. The main purpose of this paper is to develop a method that allows us determining border effects with a high degree of accuracy in the absence of intra-national trade data. We show how to improve the estimation of border effects at the example of France and Germany using data on regional transportation flows. Our results indicate that France trades about eight times more and Germany about three times more with itself than with other EU countries compared to the predictions of the gravity equation.
173. Putting per-capita income back into trade theory [24.868%]
Markusen, James R. (2013)
Downloadable (with restrictions)! A major role for per-capita income in international trade, as opposed to simply country size, was persuasively advanced by many early economists including Linder (1961), Kuznets (1966), and Chenery and Syrquin (1975). Yet this crucial element of their story was abandon by most later trade economists in favor of the analytically-tractable but counter-empirical assumption that all countries share identical and homothetic preferences. This paper presents a set of assumptions which produces multiple results when they hold jointly. Most of these results are novel, but several that are implicit or explicit in earlier literature are also noted for completeness. Adding non-homothetic preferences to traditional models helps explain such diverse phenomena as a growing skill premium, the mystery of the missing trade, home bias in consumption, the behavior of trade to GDP ratios, and the role of intra-country income distribution, from the demand side of general equilibrium. With imperfec
174. Gravity with Gravitas: A Solution to the Border Puzzle [24.674%]
James E. Anderson & Eric van Wincoop (2003)
Downloadable (with restrictions)! Gravity equations have been widely used to infer trade flow effects of various institutional arrangements. We show that estimated gravity equations do not have a theoretical foundation. This implies both that estimation suffers from omitted variables bias and that comparative statics analysis is unfounded. We develop a method that (i) consistently and efficiently estimates a theoretical gravity equation and (ii) correctly calculates the comparative statics of trade frictions. We apply the method to solve the famous McCallum border puzzle. Applying our method, we find that national borders reduce trade between industrialized countries by moderate amounts of 20-50 percent.
175. geography of asset trade and the euro: insiders and outsiders [24.218%]
Coeurdacier, Nicolas & Martin, Philippe (2009)
Downloadable! This paper analyzes the determinants of cross-border asset trade on cross-country data and a Swedish data set. We focus our analysis on the impact of the euro for the determinants of trade in bonds, equity and banking assets. With the help of a theoretical model, we disentangle the different effects that the euro may have on cross-border asset holdings for both euro zone countries and countries outside of the euro zone. We find evidence that the euro implies 1) a unilateral financial liberalization which makes it cheaper for all countries to buy euro zone assets. For bonds and equity holdings, this translates into approximately 14% and 17% lower transaction costs; 2) a preferential financial liberalization which on top of the previous effect lowers transaction costs inside the euro zone by approximately 17% and 10% for bonds and equity respectively; 3) a diversion effect due to the fact that lower transaction costs inside the euro zone entail euro countries to purchase less equity from outside t
176. The geography of asset trade and the euro: insiders and outsiders [24.216%]
Nicolas Coeurdacier & Philippe Martin (2009)
Downloadable! This paper analyzes the determinants of cross-border asset trade on cross-country data and a Swedish data set. We focus our analysis on the impact of the euro for the determinants of trade in bonds, equity and banking assets. With the help of a theoretical model, we disentangle the different effects that the euro may have on cross-border asset holdings for both euro zone countries and countries outside of the euro zone. We find evidence that the euro implies 1) a unilateral financial liberalization which makes it cheaper for all countries to buy euro zone assets. For bonds and equity holdings, this translates into approximately 14% and 17% lower transaction costs; 2) a preferential financial liberalization which on top of the previous effect lowers transaction costs inside the euro zone by approximately 17% and 10% for bonds and equity respectively; 3) a diversion effect due to the fact that lower transaction costs inside the euro zone entail euro countries to purchase less equity from outside t
177. The geography of asset trade and the euro: Insiders and outsiders [24.215%]
Coeurdacier, Nicolas & Martin, Philippe (2009)
Downloadable (with restrictions)! This paper analyzes the determinants of cross-border asset trade on cross-country data and a Swedish data set. We focus our analysis on the impact of the euro for the determinants of trade in bonds, equity and banking assets. With the help of a theoretical model, we disentangle the different effects that the euro may have on cross-border asset holdings for both euro zone countries and countries outside of the euro zone. We find evidence that the euro implies 1) a unilateral financial liberalization which makes it cheaper for all countries to buy euro zone assets. For bonds and equity holdings, this translates into approximately 14% and 17% lower transaction costs; 2) a preferential financial liberalization which on top of the previous effect lowers transaction costs inside the euro zone by approximately 17% and 10% for bonds and equity respectively; 3) a diversion effect due to the fact that lower transaction costs inside the euro zone entail euro countries to purchase less e
178. International Trade Integration: A Disaggregated Approach [24.204%]
Chen, Natalie & Novy, Dennis (2008)
Downloadable (with restrictions)! This paper investigates the sources and size of trade barriers at the industry level. We derive a micro-founded measure of industry-specific bilateral trade integration that has an in-built control for time-varying multilateral resistance. This trade integration measure is consistent with a broad range of recent trade models including the Anderson and van Wincoop (2003) framework, the Ricardian model by Eaton and Kortum (2002) and heterogeneous firms models. We use it to explore trade barriers for manufacturing industries in European Union countries between 1999 and 2003. We find a large degree of trade cost heterogeneity across industries. The most important trade barriers are transportation costs and policy factors such as Technical Barriers to Trade. Trade integration is generally lower for countries that opted out of the Euro or did not abolish border controls in accordance with the Schengen Agreement. Reductions in trade barriers explain about one-half of the growth in t
179. Comparing the fit of the gravity model for different cross-border flows [24.104%]
Wong, Wei-Kang (2008)
Downloadable (with restrictions)! This paper investigates how well the gravity model explains various cross-border flows that may lead to knowledge spillovers. It turns out that the model works well for trade and telephone traffic, but less satisfactorily for merger and acquisition flows.
180. Does corruption hinder trade for the new EU members? [23.942%]
Horsewood, Nicholas & Voicu, Anca Monika (2012)
Downloadable! The paper uses a gravity trade model to examine the impact of corruption on bilateral trade using a data set comprising OECD economies, new EU members and developing nations. Although the level of corruption of both the importing and exporting nations does hinder cross-border transactions, differences between their ethical standards do have a negative impact on trade flows. The model is used to assess the impact on exports and imports of Romania and Bulgaria joining the European Union. --
181. Road network upgrading and overland trade expansion in Sub-Saharan Africa [23.845%]
Buys, Piet & Deichmann, Uwe & Wheeler, David (2006)
Downloadable! Recent research suggests that isolation from regional and international markets has contributed significantly to poverty in many Sub-Saharan African countries. Numerous empirical studies identify poor transport infrastructure and border restrictions as significant deterrents to trade expansion. In response, the African Development Bank has proposed an integrated network of functional roads for the subcontinent. Drawing on new econometric results, the authors quantify the trade-expansion potential and costs of such a network. They use spatial network analysis techniques to identify a network of primary roads connecting allSub-Saharan capitals and other cities with populations over 500,000. The authors estimate current overland trade flows in the network using econometrically-estimated gravity model parameters, road transport quality indicators, actual road distances, and estimates of economic scale for cities in the network. Then they simulate the effect of feasible continental upgrading by setti
182. Trade Costs, Trade Balances and Current Accounts : An Application of Gravity to Multilateral Trade [23.758%]
Giorgio Fazio & Ronald Mac Donald & Jacques Melitz (2005)
Downloadable! In this paper we test the well-known hypothesis of Obstfeld and Rogoff (2000) that tradecosts are the key to explaining the so-called Feldstein-Horioka puzzle. Using a gravityframework in an intertemporal context, we provide strong support for the hypothesis and wereconcile our results with the so-called home bias puzzle. Interestingly, this requires a fundamentalrevision of Obstfeld and Rogoff’s argument. A further novelty of our work is in tyingbilateral trade behavior to desired aggregate trade balances and desired intertemporaltrade.
183. Euro's influence upon trade: Rose effect versus border effect [23.745%]
Cafiso, Gianluca (2008)
Downloadable! This paper assesses the Euro’s influence upon European trade by estimating two different indicators. The first is the so-called “Rose Effect”, while the second is the “Border Effect”. The former measures how much a country within a currency union trades more with its partners than with non-member countries, the latter measures the integration of a country with its trade partners. This study of the Euro’s influence by means of the Border Effect is a novelty in the literature, it reveals that the Euro’s influence upon trade is not so clear as papers focused only on the Rose Effect claim. This casts doubts about the consequences of the Euro introduction for the European Single Market. Both indicators are estimated by means of a gravity model for bilateral trade flows using a panel of manufacture exports among twenty-four OECD countries. JEL Classification: F10, F14, F15
184. Expanding international trade beyond the RTA border: The case of ASEAN's economic diplomacy [23.669%]
Oh, Chang Hoon & Selmier II, W. Travis (2008)
Downloadable (with restrictions)! We examine the roles of regional trade agreements (RTAs) not only in regionalization processes but also in globalization of trade. Results from various specifications of the gravity equation model confirm that a country can noticeably increase directional trade through diplomatic relations as well as through membership.
185. Trade in the Triad: How Easy is the Access to Large Markets? [23.609%]
Fontagne, Lionel & Mayer, Thierry & Zignago, Soledad (2004)
Downloadable (with restrictions)! We identify in this Paper the level of trade integration between the three largest economic powers of the world, often called the Triad: The United States, the EU and Japan. We focus on measuring possible asymmetries in market access between members of the Triad using border effects between each of those partners. We investigate trends of bilateral trade openness and show notably that there has been a deterioration of the relative access of Japanese exporters on both the American and EU markets in the 1990s. Results also show which industries have the most asymmetric market access among the different combinations of those partners. We finally provide explanations for the estimated border effects using proxies for bilateral observed protection (tariffs and NTBs), home bias of consumers, product differentiation and levels of FDI. Tariffs still matter in shaping trade patterns even in cases where those tariffs are low in magnitude. The explanations related to actual protection,
186. European Integration, Foreign Direct Investment (FDI), and the Geography of French Trade [23.471%]
Miren Lafourcade & Elisenda Paluzie (2011)
Downloadable (with restrictions)! Lafourcade M. and Paluzie E. European integration, foreign direct investment (FDI), and the geography of French trade, Regional Studies. An augmented gravity model is used to investigate whether the 1978-2000 process of European integration has changed the geography of trade within France, with a particular focus on border regions. It is found that once controlled for bilateral distance, origin- and destination-specific characteristics, French border regions trade on average 73% more with neighbouring countries than predicted by the gravity norm. The regions perform even better if they have good transport connections with these countries. However, French border regions at the periphery of Europe experienced a downward trend over the period that was partly due to the decrease in the propensity of Spanish and Italian foreign affiliates to trade with their home countries. [image omitted] Lafourcade M. et Paluzie E. Integration europeenne, investissement direct etranger (IDE) et
187. Explaining National Border Effects in the QUAD Food Trade [23.267%]
Alessandro Olper & Valentina Raimondi (2008)
Downloadable (with restrictions)! Using a 'structural' gravity-like model, this paper first provides estimates of bilateral 'border effects' in food trade among the QUAD countries (the US, Canada, Japan and the EU) at the ISIC (International Standard Industrial Classification) four-digit level (18 food sectors). It then investigates the underlying reasons for border effect, assessing the role played by policy barriers (tariffs, non-tariff barriers to trade (NTBs) and domestic support) with respect to barriers unrelated to trade policy, such as information-related costs, cultural proximity and preferences. In contrast to several previous findings, our results show that policy trade barriers, especially in the form of NTBs, are part of the story in explaining national border effects. Interestingly, in all country pair combinations, NTBs significantly dominate the trade reduction effect induced by tariffs. However, results show that elements linked to information-related costs and consumer preferences matter a g
188. Banks in Space: Does Distance Really Affect Cross-Border Banking? [23.225%]
Katja Neugebauer (2011)
Downloadable! During the last years, gravity equations have leapt from the trade literature over into the literature on financial markets. Martin and Rey (2004) were the first to provide a theoretical model for cross-border asset trade, yielding a structural gravity equation that could be tested empirically. In this paper, I use a gravity model to evaluate factors that affect cross-border banking. Furthermore, I extend the baseline model to allow for third-country effects, which have been shown to matter for international trade, using spatial econometric techniques. I try to answer the following question: First, is there a spatial dimension in cross-border banking? Second, if so, has it changed over time, and third, what happens if this spatial dimension is ignored? I use bilateral data on cross-border banking assets for 15 countries over the time period 1995-2005, and I estimate cross-section regressions for each year. I find strong evidence for a spatial dimension in crossborder banking. Furthermore, the di
189. Banks in Space: Does Distance Really Affect Cross-Border Banking? [23.225%]
Katja Neugebauer (2010)
Downloadable! During the last years, gravity equations have leapt from the trade literature over into the literature on financial markets. Martin and Rey (2004) were the first to provide a theoretical model for cross-border asset trade, yielding a structural gravity equation that could be tested empirically. In this paper, I use a gravity model to evaluate factors that affect cross-border banking. Furthermore, I extend the baseline model to allow for third-country effects, which have been shown to matter for international trade, using spatial econometric techniques. I try to answer the following question: First, is there a spatial dimension in cross-border banking? Second, if so, has it changed over time, and third, what happens if this spatial dimension is ignored? I use bilateral data on cross-border banking assets for 15 countries over the time period 1995-2005, and I estimate cross-section regressions for each year. I find strong evidence for a spatial dimension in crossborder banking. Furthermore, the di
190. Do National Borders Matter for Quebec's Trade? [23.064%]
John F. Helliwell (1996)
Downloadable! Extending McCallum's (1995) result, based on a gravity model of 1988 trade flows, that a typical Canadian province trades 22 times more with other provinces than with U.S. states of similar size and distance, this paper asks how Quebec trade patterns compare with those of other provinces. The results, based on revised data for 1988, 1989 and 1990, show that while the typical province trades more than 20 times as much with other provinces as with comparable U.S. states, for Quebec the multiple is even greater. Thus trade between Quebec and the United States appears to be an even less viable alternative to interprovincial trade for Quebec than it is for the rest of Canada. The implications of these results for international economics are considerable, as they show that trade linkages within a national economy are far greater than previously imagined. If these results are confirmed, they imply that the fabric of national economies is far tighter than that of the global trading system, even for coun
191. Social networks and trade of services: modelling interregional flows with spatial and network autocorrelation effects [22.795%]
Tamara Mata & Carlos Llano (2013)
Downloadable (with restrictions)! Recent literature on border effect has fostered research on informal barriers to trade and the role played by network dependencies. In relation to social networks, it has been shown that intensity of trade in goods is positively correlated with migration flows between pairs of countries/regions. In this article, we investigate whether such a relation also holds for interregional trade of services. We also consider whether interregional trade flows in services linked with tourism exhibit spatial and/or social network dependence. Conventional empirical gravity models assume the magnitude of bilateral flows between regions is independent of flows to/from regions located nearby in space, or flows to/from regions related through social/cultural/ethic network connections. With this aim, we provide estimates from a set of gravity models showing evidence of statistically significant spatial and network (demographic) dependence in the bilateral flows of the trade of services considere
192. Border Effects and the Gravity Equation: Consistent Methods for Estimation [22.608%]
Feenstra, Robert C (2002)
Downloadable (with restrictions)! The CES monopolistic competition model is an especially convenient way to derive the gravity equation, especially when we allow for transport costs and other trade barriers. In that case, we need to take account of the overall price indexes in each country. We review three methods to do so: using published data on price indexes; using the computational method of Anderson and van Wincoop (2001); or using country fixed effects to measure the price indexes. The latter two methods are compared on the dataset dealing with trade between and within Canada and the US. The fixed effects method produces consistent estimates of the average border effect across countries, and is simple to implement, so it might be considered to be the preferred estimation method. Copyright 2002 by Scottish Economic Society.
193. Gravity Redux: Estimation of gravity-equation coefficients, elasticities of substitution, and general equilibrium comparative st [22.223%]
Bergstrand, Jeffrey H. & Egger, Peter & Larch, Mario (2013)
Downloadable (with restrictions)! A large class of models with CES utility and iceberg trade costs are now known to generate isomorphic “gravity equations.” Economic interpretations of these gravity equations vary in terms of two basic elements: the exporter's “mass” variable and the elasticity of trade with respect to true ad valorem “trade costs.” In this paper, we offer three potential contributions. First, we formulate and estimate a structural gravity equation based on the standard Krugman model of monopolistic competition and increasing returns. In the context of this model, a key parameter, the elasticity of substitution in consumption (σ), can be estimated precisely – even without observable true ad valorem trade-cost measures – using exporter's population and observable variables that influence trade costs. Second, in the empirical context of the well-known McCallum Canadian–U.S. “border puzzle,” our approach – allowing estimation of σ – yields considerably different gener
194. What Separates Us? Sources of Resistance to Globalization [22.168%]
Keith Head & Thierry Mayer (2013)
Downloadable! With increasing sophistication, economists have been estimating gravity equations for five decades. Robust evidence shows that borders and distance impede trade by much more than tariffs or transport costs can explain. We therefore advocate investigation of other sources of resistance, despite the greater difficult involved in measuring and modeling them. From our selective review of recent findings, a unifying explanation emerges. A legacy of historical isolation and conflict forged a world economy in which neither tastes nor information are homogeneously distributed. Cultural difference and inadequate information manifest themselves most strongly at national borders and over distance.
195. articles: Spatial markets and the potential for economic integration between Canadian and U.S. regions [22.104%]
W. Mark Brown & William P. Anderson (2002)
Downloadable (with restrictions)! The potential for further economic integration among Canadian and American regions is measured by comparing province-to-state trade with state-to-state trade, where the latter is used as a benchmark of integration. To accomplish this, an attraction constrained gravity model is derived from micro foundations and estimated. The analysis demonstrates that after controlling for variations in output, distance, wages, productivity, and localization economies, the border remains a significant barrier to trade, although much less than previous estimates of the border effect using internal Canadian trade as a benchmark. The model's results also indicate that the border's influence varies across sectors, and the influence appears to be, in part, related to the presence of tariff and non-tariff barriers.
196. Nontariff Barriers [21.887%]
John C. Beghin (2006)
Downloadable! Nontariff barriers (NTBs) refer to the wide range of policy interventions other than border tariffs that affect trade of goods, services, and factors of production. Most taxonomies of NTBs include market-specific trade and domestic policies affecting trade in that market. Extended taxonomies include macro-economic policies affecting trade. NTBs have gained importance as tariff levels have been reduced worldwide. Common measures of NTBs include tariff-equivalents of the NTB policy or policies and count and frequency measures of NTBs. These NTB measures are subsequently used in various trade models, including gravity equations, to assess trade and/or welfare effects of the measured NTBs.
197. Nontariff Barriers [21.887%]
John C. Beghin (2006)
Downloadable! Nontariff barriers (NTBs) refer to the wide range of policy interventions other than border tariffs that affect trade of goods, services, and factors of production. Most taxonomies of NTBs include market-specific trade and domestic policies affecting trade in that market. Extended taxonomies include macro-economic policies affecting trade. NTBs have gained importance as tariff levels have been reduced worldwide. Common measures of NTBs include tariff-equivalents of the NTB policy or policies and count and frequency measures of NTBs. These NTB measures are subsequently used in various trade models, including gravity equations, to assess trade and/or welfare effects of the measured NTBs.
198. Patterns and determinants of agro-food trade of the BRIC countries: The role of institution [21.747%]
Bojnec, Štefan & Fertő, Imre & Fogarasi, József (2011)
Downloadable! Agro-food trade between the BRIC countries has increased. Brazil and China contributed to the rapid increase of agro-food trade. The Russian Federation experienced the stagnating and the most volatile agro-food trade over time. The composition of agro-food trade for the BRIC countries varies by the BEC agro-food trade categories and over time. The prevailing in the composition of agro-food trade are BEC122 and BEC111 for Brazil and the Russian Federation, and BEC122 and BEC112 for India and China. Brazil and India have strengthened their market shares in agro-food trade between the BRIC countries, while the Russian Federation has experienced the most severe deterioration. The number and the share of trading partners that have traded every year vary between the BRIC countries and the BEC agro-food trade categories over time. Agro-food trade between the BRIC countries is positively associated with the GDP size and population size in importing countries, but negatively associated with the GDP size
199. Borders, Trade and Welfare [21.689%]
James E. Anderson & Eric van Wincoop (2001)
Downloadable! International economic integration yields large potential welfare effects, even in a static constant returns competitive world economy. Our method is novel. The effect of border barriers on trade flows is often inferred from gravity models. But their rather atheoretic structure precludes welfare analysis. Computable general equilibrium models are designed for tight welfare analysis, but lack econometric foundation. Our method combines these approaches. Gravity models based on Anderson's (1979) interpretation are full general equilibrium models of a special simple sort. In Anderson and van Wincoop (NBER WP 8079, 2001) we develop and estimate this structure, then calculate the comparative static effects on trade flows of border barriers. In this paper we further deploy the model to explore the comparative statics of welfare with respect to borders, to currency unions and to NAFTA. Our NAFTA exercise does a much better job of replicating the actual trade flow changes than do computable general equi
200. Do National Borders Matter for Quebec's Trade? [21.503%]
John F. Helliwell (1996)
Downloadable (with restrictions)! Using a gravity model of 1988-90 merchandise trade flows among Canadian provinces and between Canadian provinces and U.S. states, this paper, building on earlier work by McCallum, shows that Quebec trades twenty times more with other provinces than it does with U.S. states of similar size and distance. Comparison with survey evidence shows that these internal trade linkages are far stronger than previously was thought. The possible implications for Quebec separation, and for international economics, are considerable. If more broadly confirmed, the results imply that the fabric of national economies is far tighter than that of the global trading system, even for countries operating without substantial trade barriers.
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Search for (border | home bias) trade gravity. Search results: border : 12780, bordering : 173, borderings : 0, bordered : 36, borderer : 0, borders : 3259, home : 24195, homely : 0, homing : 97, homed : 3, homer : 76, homers : 2, homes : 2417, bias : 28993, biasing : 197, biased : 8294, biases : 5325, biasness : 12, trade : 188418, trading : 36145, traded : 7679, trader : 1442, traders : 6966, trades : 4300, gravity : 5790, gravities : 1. Results 201-250 of 370. Search took 1.670 seconds
201. The Institutional Determinants of Bilateral Trade Patterns [21.497%]
Henri L.F. De Groot & Gert-Jan Linders & Piet Rietveld & Uma Subramanian (2003)
Downloadable! The intensity of international transactions remains lower than could be potentially justified on the basis of transportation costs alone. This has become known as the ?mystery of the missing trade?. Transaction costs may be responsible for ?under-trading? across national borders. More specifically, the relatively low intensity of foreign trade may reflect the importance of institutions for cross-border transactions. This paper studies the effect of institutions on trade flows, using a gravity model approach. According to the gravity model, trade between any two countries is a function of each country's gross domestic product, the distance between them, and possibly other variables that reflect the costs of trade between them. We start from a standard gravity equation that incorporates variables for geographical proximity, common language, trade policy and common history. These factors reflect costs of trade across geographical and cultural distances. The quality of governance and the extent of f
202. Trade, Wages and Productivity [21.374%]
Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum (2009)
Downloadable! We develop a new general equilibrium model of monopolistic competition with heterogeneous firms, variable demand elasticity and multiple asymmetric regions, in which trade integration induces wage and productivity changes. Using Canada-US interregional trade data, we structurally estimate a theory-based gravity equation system featuring endogenous wages and productivity. Given the estimated parameter values, we first decompose border effects into a pure border effect, relative and absolute wage effects, and a selection effect. We then quantify the impacts of removing the trade distortions generated by the Canada-US border on regional market aggregates such as wages, productivity, markups, the mass of varieties produced and consumed, as well as welfare. Last, we extend the counterfactual analysis to the firm level by generating productivity distributions and their changes via simulation.
203. Trade, Wages and Productivity [21.374%]
Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum (2009)
Downloadable! We develop a new general equilibrium model of monopolistic competition with heterogeneous firms, variable demand elasticity and multiple asymmetric regions, in which trade integration induces wage and productivity changes. Using Canada-US interregional trade data, we structurally estimate a theory-based gravity equation system featuring endogenous wages and productivity. Given the estimated parameter values, we first decompose "border effects" into a "pure" border effect, relative and absolute wage effects, and a selection effect. We then quantify the impacts of removing the trade distortions generated by the Canada-US border on regional market aggregates such as wages, productivity, markups, the mass of varieties produced and consumed, as well as welfare. Last, we extend the counterfactual analysis to the firm level by generating productivity distributions and their changes via simulation.
204. Trade, wages, and productivity [21.373%]
Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Südekum, Jens (2009)
Downloadable (with restrictions)! We develop a new general equilibrium model of monopolistic competition with heterogeneous firms, variable demand elasticity and multiple asymmetric regions, in which trade integration induces wage and productivity changes. Using Canada-US interregional trade data, we structurally estimate a theory-based gravity equation system featuring endogenous wages and productivity. Given the estimated parameter values, we first decompose ‘border effects’ into a ‘pure’ border effect, relative and absolute wage effects, and a selection effect. We then quantify the impacts of removing the trade distortions generated by the Canada-US border on regional market aggregates such as wages, productivity, markups, the mass of varieties produced and consumed, as well as welfare. Last, we extend the counterfactual analysis to the firm level by generating productivity distributions and their changes via simulation.
205. The Home-Market Effect and Bilateral Trade Patterns [20.892%]
Gordon H. Hanson & Chong Xiang (2004)
Downloadable (with restrictions)! We develop a monopolistic-competition model of trade with many industries to examine how home-market effects vary with industry characteristics. Industries with high transport costs and more differentiated products tend to be more concentrated in large countries than industries with low transport costs and less differentiated products. We test this prediction using a difference-in-difference gravity specification that controls for import tariffs, importing-country remoteness, home bias in demand, and the tendency for large countries to export more of all goods. We find strong evidence of home-market effects whose intensity varies across industries in a manner consistent with theory.
206. National borders matterwhere one draws the lines too [20.828%]
Emmanuelle Lavallée & Vincent Vicard (2013)
Downloadable (with restrictions)! The fact that crossing a political border dramatically reduces trade flows has been widely documented in the literature. The increasing number of borders has surprisingly attracted much less attention. The number of independent countries has indeed risen from 72 in 1948 to 192 today. This paper estimates the effect of political disintegration since World War II on the measured growth in world trade. We first show that trade statistics should be considered carefully when assessing globalization over time, since the definition of trade partners varies over time. We document a sizeable resulting accounting artefact, which accounts for 17% of world trade in 2007. Second, based on a structural gravity equation, we estimate that since World War II political disintegration alone has raised measured international trade flows by 7% but decreased actual trade flows (including inter-regional trade) by 2%.
207. The Incidence of Geography on Canada's Services Trade [20.752%]
James E. Anderson & Catherine A. Milot & Yoto V. Yotov (2011)
Downloadable (with restrictions)! We estimate geographic barriers to export trade in nine service categories for Canada's provinces from 1997 to 2007 using the structural gravity model. Constructed Home, Domestic and Foreign Bias indexes (the last two new) capture the direct plus indirect effect of services trade costs on intra-provincial, inter-provincial and international trade relative to their frictionless benchmarks. Barriers to services international trade are huge relative to inter-provincial trade and large relative to goods international trade. A novel test confirms the fit of structural gravity with services trade data.
208. Sectorial Border Effects in the European Single Market: an Explanation through Industrial Concentration [20.683%]
Cafiso, Gianluca (2009)
Downloadable! The purpose of this paper is to explain the relation between the Border Effect and industrial concentration. This is achieved by founding this relation on the Home Market Effect and testing the robustness of this foundation through an application to the European Single Market. A sectorial Gravity Equation is estimated using different econometric estimators, in particular we discuss a recently suggested technique for the estimation of log-linear CES models. Overall, our findings suggest a steady relation between the Border Effect and industrial concentration. Besides, the analysis of industrial concentration through a synthetic index provides us with valuable insights into the structure of the European industry. JEL Classification: F10, F12, F15.
209. Why Has the Border Effect in the Japanese Machinery Sectors Declined? The Role of Business Networks in East Asian-Machinery Trad [20.630%]
Kyoji Fukao & Toshihiro Okubo (2008)
Downloadable! This paper analyzes the causes of the decline in Japan's border effect in four machinery industries (electrical, general, precision, and transportation machinery) by estimating gravity equations for Japan's international and interregional trade. In the estimation, we explicitly take account of firms' networks. We find that ownership relations usually enhance trade between two regions (countries); moreover, we find that we can explain 35% of the decline in Japan's border effect from 1980 to 1995 in the electrical machinery industry by the increase of international networks.
210. Intra-ECO Trade: A Potential Region for Pakistan’s Future Trade [20.564%]
Jahangir Khan Achakzai (2006)
Downloadable! A standard gravity model was applied to estimate the magnitude of potential trade flows between Pakistan and the nine ECO member countries. The major issue in this analysis is to explore that Intra- ECO trade has great potential for Pakistan and that it got lower share than its potential. The results from the gravity model confirm that ECO has a positive and significant impact on intra-regional trade. It suggests that intra-regional trade is lower than what would be predicted by the gravity equation, suggesting greater scope for regional integration among the ECO member countries. This is especially the case between countries that have a common geographical border. The privilege of geography and the existence of trade preferences among ECO members could be expanded to cover potential trade to neighboring countries.
211. Why Is Agricultural Trade within ECOWAS So High? [20.483%]
Lassana Cissokho & Jonathan Haughton & Kossi Makpayo & Abdoulaye Seck (2013)
Downloadable (with restrictions)! It is widely believed that the countries of Africa trade relatively little with the outside world, and among themselves, despite an extensive network of regional trade agreements. We examine this proposition by focusing on agricultural trade. Specifically, we ask whether non-tariff barriers (NTBs) are stunting agricultural trade within the Economic Community of West African States (ECOWAS), a grouping of fifteen countries in West Africa that has removed tariffs on agricultural trade among its members. Our survey of truckers in Tambacounda (Senegal) in August 2009 found evidence of extensive bribery by police and border officials, effectively representing a barrier to trading. We estimate a unit-elastic structural gravity model of agricultural trade, using data from 135 countries for 2000, 2003 and 2006, and employing Tobit and other types of structural specification. A robust result emerges: agricultural trade among the countries of ECOWAS is higher than one would expect. Thi
212. The sensitivity of trade flows to trade barriers [20.090%]
Raimondi, Valentina & Olper, Alessandro (2009)
Downloadable! This study analyzes the sensitivity of trade flows to trade barriers from gravity equations, using different econometric techniques recently highlighted in the literature. Specifically, we compare a benchmark OLS fixed effects specification a la Feenstra (2002) with three emerging estimation methods: the standard Heckman correction for selection bias, to account for zero trade flows; the Eaton and Tamura (1994) Tobit estimator, to solve limited-dependent variable issues; and, finally, the Poisson pseudo-maximum-likelihood (PPML) technique, to correct for the presence of heteroskedasticity. Our gravity model includes trade among 193 exporter and 99 importer countries, in 18 food industry sectors. The paper achieves two goals: First it provides estimates of the elasticity of substitution obtained using the four estimation techniques; Second, it gives a dimension to the trade reduction effect induced by existing border protection, by simulating the effect of a full trade liberalization scenario on
213. What Drives Capital Flows? The Case of Cross-Border M&A Activity and Financial Deepening [19.982%]
di Giovanni, Julian (2002)
Downloadable! What macroeconomic and financial variables play key roles in the foreign direct investment decision (FDI) of firms? This question is addressed in this paper using a large panel data set of cross-border Merger & Acquisition (M&A) deals for the period 1990-1999. Various econometric specifications are built around the simple "gravity model" commonly used in the trade literature. Interestingly, financial variables and other institutional factors seem to play a significant role in M&A flows. In particular the size of financial markets, as measured by the stock market capitalization to GDP ratio and the credit provided to the private sector by financial institutions to GDP ratio in the domestic economy, have sizeable positive effects on the incentives for domestic firms to invest abroad.
214. Trade Facilitation and the EU-ACP Economic Partnership Agreements [19.890%]
Persson, Maria (2008)
This paper assesses the potential effects from trade facilitation in terms of increased trade flows both on average and specifically for the six regional groups of ACP countries negotiating Economic Partnership Agreements (EPAs) with the EU. Data from the World Bank’s Doing Business Database on the time required to export or import are used as indicators of cross-border transaction costs, and a gravity model on two-way bilateral trade between 22 EU countries and 100 developing countries is estimated using a sample selection approach. The results suggest that time delays on the part of the exporter and the importer generally significantly decrease trade flows, but also that this effect is not constant, in the sense that the elasticity of trade with respect to border delays declines at higher levels of time requirements. On average, lowering border delays in the exporting country by one day from the sample mean would yield an export-increasing effect of about 1 percent, while the same reduction in the importi
215. European Integration, FDI and the Internal Geography of Trade: Evidence from Western European Border Regions [19.749%]
Miren Lafourcade & Elisenda Paluzie Hernandez (2005)
Downloadable! In this paper we use a gravity model to study the trade performance of French and Spanish border regions relatively to non-border regions, over the past two decades. We find that, controlling for their size, proximity and location characteristics, border regions trade on average between 62% and 193% more with their neighbouring country than other regions, and twice as much if they are endowed with good cross border transport infrastructures. Despite European integration, however, this trade outperformance has fallen for the most peripheral regions within the EU. We show that this trend was linked in part to a shift in the propensity of foreign investors to move their affiliates from the regions near their home market to the regions bordering the EU core.
216. Estimating Gravity Equations: To Log or Not to Log? [19.434%]
Boriss Siliverstovs & Dieter Schumacher (2007)
Downloadable! This study compares two alternative approaches to estimate parameters in gravity equations. We compare the traditional OLS approach applied to the log-linear form of the gravity model with the Poisson Quasi Maximum Likelihood (PQML) estimation procedure applied to the non-linear multiplicative specification of the gravity model. We use the trade flows for all products, for all manufacturing products as well as for manufacturing products broken down by three-digit ISIC Rev.2 categories. We base our conclusions on the generalised gravity model of Bergstrand (1989) that allows us to investigate differences in factor-proportions and home-market effects at the industry level. In addition, we compare the effects of other explanatory variables such as exporter and importer total income, distance, preferential trade agreements, common border, historical ties, and common language on the volume of trade. Our study provides comprehensive evidence on likely qualitative and/or quantitative differences in the
217. Estimating gravity equations: to log or not to log? [19.433%]
Boriss Siliverstovs & Dieter Schumacher (2009)
Downloadable (with restrictions)! This study compares two alternative approaches to estimate parameters in gravity equations. We compare the traditional OLS approach applied to the log-linear form of the gravity model with the Poisson Quasi Maximum Likelihood (PQML) estimation procedure applied to the non-linear multiplicative specification of the gravity model. We use the trade flows for all products, for all manufacturing products as well as for manufacturing products broken down by three-digit ISIC Rev.2 categories. We base our conclusions on the generalised gravity model of Bergstrand (1989) that allows us to investigate differences in factor-proportions and home-market effects at the industry level. In addition, we compare the effects of other explanatory variables such as exporter and importer total income, distance, preferential trade agreements, common border, historical ties, and common language on the volume of trade. Our study provides comprehensive evidence on likely qualitative and/or quantitativ
218. Toward a North American Security Perimeter? Assessing the Trade and FDI Impacts of Liberalizing 9/11 Security Measures [19.182%]
Patrick Georges & Marcel Mérette & Qi Zhang (2012)
Downloadable! This paper examines, for the first time, the trade and FDI impacts of a North American Security Perimeter that would liberalize the post 9/11 security measures at the Canada-US border. First, the study estimates econometrically the impact of post 9/11 security measures on bilateral (US-Canada) trade flows using a gravity model. Second, using these econometric estimates together with a three-region nine-sector general equilibrium model, we compute sectoral tariff rates “equivalent” to the 9/11 security measures. Finally, we assess the (general equilibrium) impacts on trade and FDI of a change of security paradigm toward a North American Security Perimeter. The paper shows that the economic opportunity gains occurring to Canada and the US from the liberalization of the 9/11 security measures amount to US$20 billion annually. This figure, once added to the direct administrative costs of the post 9/11 security measures, warrants serious consideration in policy discussions of a North American Sec
219. Trade Policy, Trade Costs, and Developing Country Trade [19.126%]
Hoekman, Bernard & Nicita, Alessandro (2011)
Downloadable (with restrictions)! This paper reviews some indices of trade restrictiveness and trade facilitation and compares the trade impact of different types of trade restrictions applied at the border with the effects of domestic policies that affect trade costs. Based on a gravity regression framework, the analysis suggests that tariffs and non-tariff measures continue to be a significant source of trade restrictiveness for low-income countries despite preferential access programs. The results also suggest that behind-the-border measures to improve logistics performance and facilitate trade are likely to have a comparable, if not larger, effect in expanding developing country trade, especially exports.
220. Disintegration and trade [18.767%]
Fidrmuc, Jarko & Fidrmuc, Jan (2001)
Downloadable! The gravity model of trade is utilized to assess the impact of disintegration on trade. The analysis is based on three recent disintegration episodes involving the former Soviet Union, Yugoslavia and Czechoslovakia. The results point to a very strong home bias around the time of disintegration, with intra-union trade exceeding normal trade approximately 43 times in the former Soviet Union and Czechoslovakia, and 24 times in the former Yugoslavia. Disintegration was followed by a sharp fall in trade intensity. Nevertheless, there is a considerable hysteresis in economic relations, with trade flows among the former constituent Republics still between two and 30 times greater than normal trade in 1998.<P>(This abstract was borrowed from another version of this item.)
221. Armenia’s trade performance in 1995-2002 and the effect of closed borders: a cross-country perspective [18.698%]
Freinkman, Lev & Polyakov, Evgeny & Revenco, Carolina (2003)
Downloadable! The paper deals with two issues. First, it focuses on the analysis of Armenia’s trade performance based on the utilization of standard statistical models and develops comparative estimates of this performance relative to the peer countries. The comparison is undertaken in terms of trade openness, diversification, and composition. The main finding is that Armenia has been lagging in its export development relative to most CIS countries. The recent improvements in exports helped somewhat to reduce the gap. The second part of the paper provides for re-estimation of the “costs of blockade” effect. Armenia’s trade under-performance cannot be explained in terms of distorted government policies, because Armenia is recognized as a reform leader in the CIS.
222. The Geography of European Cross-Border Banking: The Impact of Cultural and Political Factors [18.697%]
Heuchemer, Sylvia & Kleimeier, Stefanie & Sander, Harald (2008)
Downloadable! We investigate the determinants of European banking market integration with a focus on the potentially limiting role of cultural and political factors. Employing a unique data set of European cross-border loans and deposits, the study uses various gravity models that are augmented by societal proxies. While trade-theoretic reasoning can explain part of the surge in cross-border banking, we demonstrate that distance and borders still matter in the geography of European cross-border banking. Moreover, we can identify cultural differences and different legal family origin as important barriers to integration.
223. Europe’s Internal Market at Fifty: Over the Hill? [18.573%]
Straathof, B. & Linders, G.J.M. (2009)
Downloadable! For more than half a century, members of the European Union (EU) have pursued policies aimed at reducing the cost of cross-border transactions. Using a closed-form solution for the non-linear gravity system of Anderson and Van Wincoop (2003) we find that Internal Market policies have created trade between EU members, while diversion of trade with non members has been limited. Around 1995, 18 percent of total trade by EU15 countries can be attributed to the Internal Market. In the second half of the 1990’s the European advantage started to deteriorate relative to other trade flows: in 2005 the contribution of the Internal Market was just 9 percent. Most enlargements of the EU have had a positive impact on trade.
224. How Much do Non-Tariff Measures Explain the Border Effect at Entry to the EU Market? The CEECs Agri-Food Exports to EU in the Pr [18.361%]
Chevassus-Lozza, Emmanuelle & Latouche, Karine & Majkovic, Darja (2007)
Downloadable! Since the Single European Market (SEM) has been established, the free movement of goods has been facilitated not only by removing border formalities, but also by the technical harmonisation of national legislation in each member state. For the agri-food sector a particular concern is to guarantee the safety and integrity of products. In this respect, the European Commission has developed a stringent policy regarding food safety (sanitary and phytosanitary measures) and consumer information (quality measures). Strict regulation is therefore imposed for all agri-food products commercialised in the SEM, whether of European or third countries. In the case of EU enlargement, accession to the SEM is conditional upon the candidate countries accepting the obligations of the internal market, and therefore accepting these principles of free trade. Fulfilling the requirements for EU accession means for acceding countries not only costs related to adjustments of their production technologies in order to be
225. Border effects for domestic and international Canadian passenger air travel [18.237%]
Hazledine, Tim (2009)
Downloadable (with restrictions)! An augmented gravity model of passenger air travel between five Canadian airports and destinations within and without of Canada reveals a substantial border effect. After controlling for GDP, populations and distance, the number of seats offered on domestic routes is about six times the number on international flights. This result is consistent with the border effects found in studies of international merchandise trade.
226. Does Trade Facilitation Matter In Bilateral Trade? [18.172%]
Chahir Zaki (2009)
Downloadable! This paper estimates an augmented gravity model incorporating different aspects of trade facilitation in developed and developing countries. Trade facilitation is defined as measures that aim at making international trade easier by eliminating administrative delays, simplifying commercial procedures, increasing transparency, security and the place of new technologies in trade. This paper provides new theoretical and empirical enhancements. On the one hand, the model is based on theoretical foundations related to monopolistic competition and border effects. The originality of this paper is that trade facilitation facets are included in the model. On the other hand, the empirical achievement of the paper is that it uses different databases allowing us to take into account many features of trade facilitation. I use several databases coming from different sources: Doing Business (World Bank) and Institutional Profiles (CEPII). My main findings show that transaction time for imports and the number of
227. Bilateral Import Protection, Free Trade Agreements, and Other Factors Influencing Trade Flows in Agriculture and Clothing [18.153%]
Thomas L. Vollrath & Mark J. Gehlhar & Charles B. Hallahan (2009)
Downloadable (with restrictions)! "Many factors shape the global network of bilateral trade including fundamental forces of supply and demand factors and government policies. This study uses the generalised gravity framework to distinguish among the different drivers that either deter or aid partner trade in land-intensive agriculture and labour-intensive clothing. The dataset used in the analysis includes bilateral trade among 70 countries in 1995, 2000 and 2005. Collectively, the 70 countries account for 85% of the world's trade in agriculture and 96% of its GDP. Empirical results lend support to the Heckscher-Ohlin explanation of trade, namely that relative factor endowments motivate cross-border trade. Results also show that tariffs are not always binding and bilateral free-trade agreements more often divert rather than create trade." Copyright (c) 2009 The Agricultural Economics Society. No claim to original US government works.
228. Trade flows in a spatial oligopoly: gravity fits well, but what does it explain? [18.114%]
Alberto Salvo (2010)
Downloadable (with restrictions)! Large distance and border effects on trade flows in some industries may result from the collusive division of geographic markets. In the Brazilian cement industry, traditional gravity equations fit the data well, yet limited regional flows are due to firms' strategic behaviour. Thanks to a unique institutional setting and an unusually rich data set, I directly control for trade costs, which - despite their importance - cannot account for the observed segmentation of local markets at current prices. The paper highlights how collusive behaviour can magnify the effects of distance, as firms use geography to coordinate on higher prices and less cross-hauling.
229. Road Network Upgrading and Overland Trade Expansion in Sub-Saharan Africa-super- † [17.865%]
Piet Buys & Uwe Deichmann & David Wheeler (2010)
Downloadable (with restrictions)! Recent research suggests that poor economic integration and isolation from regional and international markets have contributed significantly to poverty in Sub-Saharan Africa. Poor transport infrastructure and border restrictions are major deterrents to trade expansion which would stimulate economic growth and poverty reduction. Using spatial network analysis techniques and gravity trade model estimations, this paper quantifies the economics of upgrading a primary road network that connects the major urban areas in the region. The results indicate that continental network upgrading is worth serious consideration from an economic perspective. Our simulations suggest that overland trade among Sub-Saharan African countries might expand by about $250 billion over 15 years, with major direct and indirect benefits for the rural poor. Financing the programme would require about $20 billion for initial upgrading and $1 billion annually for maintenance. Copyright 2010 The author 2010.
230. Gravity with gravitas: comment [17.753%]
Bas Straathof (2008)
Downloadable! In GRAVITY WITH GRAVITAS: A SOLUTION TO THE BORDER PUZZLE, Anderson and Van Wincoop (2003) estimate what trade between US states and Canadian provinces would have been if the border between Canada and the United States had not existed. They showed that computing the border effect requires solving a non-linear system of multilateral price indexes. This note shows that the non-linear system can be solved analytically, such that a numerical approximation is no longer needed. The exact solution yields a reduced-form log-linear gravity equation that can be estimated using standard econometric techniques. After estimation, the calculation of treatment effects like the border effect is straightforward. Using the same data and assumptions, I find that the border effect for Canada is half as large as reported by Anderson and Van Wincoop.
231. Trade and the global recession [17.718%]
Jonathan Eaton & Sam Kortum & Brent Neiman & John Romalis (2010)
Downloadable! The ratio of global trade to GDP declined by nearly 30 percent during the global recession of 2008-2009. This large drop in international trade has generated significant attention and concern. Did the decline simply reflect the severity of the recession for traded goods industries? Or alternatively, did international trade shrink due to factors unique to cross border transactions? This paper merges an input-output framework with a gravity trade model and solves numerically several general equilibrium counterfactual scenarios which quantify the relative importance for the decline in trade of the changing composition of global GDP and changes in trade frictions. Our results suggest that the relative decline in demand for manufactures was the most important driver of the decline in manufacturing trade. Changes in demand for durable manufactures alone accounted for 65 percent of the cross-country variation in changes in manufacturing trade/GDP. The decline in total manufacturing demand (durables and
232. Trade and the Global Recession [17.718%]
Samuel S. Kortum & Jonathan Eaton & Brent Neiman & John Romalis (2010)
Downloadable! The ratio of global trade to GDP declined by nearly 30 percent during the global recession of 2008-2009. This large drop in international trade has generated significant attention and concern. Did the decline simply reflect the severity of the recession for traded goods industries? Or alternatively, did international trade shrink due to factors unique to cross border transactions? This paper merges an input-output framework with a gravity trade model and solves numerically several general equilibrium counterfactual scenarios which quantify the relative importance for the decline in trade of the changing composition of global GDP and changes in trade frictions. Our results suggest that the relative decline in demand for manufactures was the most important driver of the decline in manufacturing trade. Changes in demand for durable manufactures alone accounted for 65 percent of the cross-country variation in changes in manufacturing trade/GDP. The decline in total manufacturing demand (durables and
233. ‘Dual’ gravity: using spatial econometrics to control for multilateral resistance [17.613%]
BEHRENS, Kristian & ERTUR, Cem & KOCH, Wilfried (2007)
Downloadable! We propose a quantity-based `dual' version of the gravity equation that yields an estimating equation with both cross-sectional interdependence and spatially lagged error terms. Such an equation can be concisely estimated using spatial econometric techniques. We illustrate this methodology by applying it to the Canada-U.S. data set used previously, among others, by Anderson and van Wincoop (2003) and Feenstra (2002, 2004). Our key result is to show that controlling directly for spatial interdependence across trade flows, as suggested by theory, significantly reduces border effects because it captures `multilateral resistance'. Using a spatial autoregressive moving average specification, we find that border effects between the U.S. and Canada are smaller than in previous studies: about 8 for Canadian provinces and about 1.3 for U.S. states. Yet, heterogeneous coefficient estimations reveal that there is much variation across provinces and states.
234. Dual gravity : Using spatial econometrics to control for multilateral resistance [17.613%]
KOCH, Wilfried & ERTUR, Cem & BEHRENS, Kristian (2007)
Downloadable! We propose a quantity-based "dual" version of the gravity equation that yields an estimating equation with both cross-sectional interdependence and spatially lagged error terms. Such an equation can be concisely estimated using spatial econometric techniques. We illustrate this methodology by applying it to the Canada-U.S. data set used previously, among others, by Anderson and van Wincoop (2003) and Feenstra (2002, 2004). Our key result is to show that controlling directly for spatial interdependence across trade flows, as suggested by theory, significantly reduces border effects because it captures "multilateral resistance". Using a spatial autoregressive moving average specification, we find that border effects between the U.S. and Canada are smaller than in previous studies : about 8 for Canadian provinces and about 1.3 for U.S. states. Yet, heterogeneous coefficient estimations reveal that there is much variation across provinces and states.
235. الآثار الإقتصادية للتجارة الخارجية بين مصر والكوميسا بإستخدام نموذج [17.584%]
Shehata, Emad Abd Elmessih (2011)
Downloadable! Common Market for Eastern and Southern Africa (COMESA) is considered one of the most economic blocks in Africa, where membership includes nineteen countries, including Egypt since the mid-1998, and aims to increase the prospects for cooperation and increase trade between COMESA countries. Research problem concerned with that, volume of trade exchange between Egypt and COMESA is relatively small, which will reflect difficulty reducing the increasing in trade deficit, and also difficulty to obtain foreign exchange which is necessary for economic development. Objective of research was how to increase the volume of trade exchange between Egypt and COMESA, in the light of regional and spatial association among them, and to identify the most important factors affecting the foreign trade of Egypt with COMESA, moreover, standing on the countries which are responsible for increasing or decreasing Egypt's exports or imports. Gravity models via spatial analysis were estimated, via tobit random effect in th
236. The Internationalization of Inventive Activity: A Gravity Model Using Patent Data [17.560%]
Picci, Lucio (2008)
Downloadable! This paper discusses the extent and the determinants of the internationalization of European inventive activity, between 1990 and 2004, using an innovative method to treat the information contained in the European Patent Office's Patstat database. The observed level of internationalization of inventive activities, while being rather low, has steadily increased over time. The amount of collaboration between actors residing in different countries is assessed by means of a "gravity model", as it is familiar in the literature on international trade. The amount of bilateral collaboration is positively affected by the presence of a common language and a common border, and by the common participation in the European Union. Participation in the Euro Zone is also found to have a (marginally) negative effect. International collaboration is negatively affected by distance, with estimated elasticities that are significantly smaller than the ones that characterize international trade. Contrary to the
237. Why Has the Border Effect in the Japanese Machinery Sectors Declined?: The Role of Business Networks in East Asian Machinery Tra [17.518%]
Fukao, Kyoji & Okubo, Toshihiro (2011)
This paper analyzes the impact of firm networks on Japan’s national border effect. We estimate gravity equations using data on Japan’s international and interregional trade in four machinery industries (electrical, general, precision and transportation machinery). The machinery sector is the most important manufacturing sector for exports and outward foreign direct investment (FDI) in Japan. By taking into account international as well as interregional firm networks, we find that ownership relations usually enhance exports from parent firms to establishment. Consequently we can explain 15% (7%, 1% and 0.5%) of the decline in Japan’s border effect from 1980 to 1995 in precision (transportation, general electrical) machinery sector by the increase of international networks.
238. Why Has the Border Effect in the Japanese Machinery Sectors Declined? The Role of Business Networks in East Asian Machinery Trad [17.517%]
Kyoji Fukao & Toshihiro Okubo (2011)
Downloadable! This paper analyzes the impact of firm networks on Japan's national border effect. We estimate gravity equations using data on Japan's international and interregional trade in four machinery industries (electrical, general, precision and transportation machinery). The machinery sector is the most important manufacturing sector for exports and outward foreign direct investment (FDI) in Japan. By taking into account international as well as interregional firm networks, we find that ownership relations usually enhance exports from parent firms to establishment. Consequently we can explain 15% (7%, 1% and 0.5%) of the decline in Japan's border effect from 1980 to 1995 in precision (transportation, general electrical) machinery sector by the increase of international networks.
239. Market Access Asymmetry in Food Trade among Quad Countries [17.477%]
Olper, Alessandro & Raimondi, Valentina (2005)
Downloadable! This paper uses a gravity-like structure derived from a monopolistic competition model to measure market access among Canada, USA, Japan and EU – Quad countries – over the 1996-2001 period. We explore the overall asymmetry and 18 food industrial-level asymmetries of bilateral trade openness. Using actual bilateral estimates of tariffs and nontariff barriers, we investigate their role in explaining the trade reduction effect of national borders. A representative estimate of market access shows that higher asymmetries exist in USA, Canada and EU trade with Japan. Quite surprisingly, the last country is always more open than the reverse. Finally, we found that tariffs and NTBs explain a significant part of the border effects and that the NTB role is often higher than that of tariff.
240. The Determinants of Cross-Border Equity Flows: The Geography of Information [17.383%]
Portes, Richard & Rey, Hélène (2000)
Downloadable! We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The model integrates elements of the finance literature on portfolio composition and the international macroeconomics and asset trade literature. Gross asset flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. Distance proxies some information costs, and other variables explicitly represent information transmission, an information asymmetry between domestic and foreign investors, and the efficiency of transactions. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information is the main determinant of the pattern of international transactions, while there is little support in our data for diversification and ‘return-chasing’ motives for transactions.
241. Trade in Northeast Asia: Why do Trade Costs Matter? [17.305%]
Prabir De (2006)
Downloadable! Trade costs are often cited as an important determinant of the volume of trade. This paper provides enough evidences to ascertain that today’s trade issues in Northeast Asia go beyond the traditional mechanisms of tariffs, and include “behind-the-border” issues. By estimating a modified gravity equation, controlling for endogeneity and remoteness, we find that variations in transaction costs along with trade infrastructure facilities have significant influence on regional trade flows in Northeast Asia. On average, 10 percent saving in transaction costs increases imports by about 5 percent in Northeast Asia. This paper concludes that when tariffs tend to become low in Northeast Asia, the economies in this region could potentially benefit substantially from higher trade provided trade costs are well controlled.
242. Trade, wages and productivity [17.222%]
Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum (2009)
Downloadable! We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favours wage convergence, boosts competition, and forces the least efficient firms to leave the market, thereby affecting aggregate productivity. Since wage and productivity responses are endogenous, our model is well suited to studying the impact of trade integration on aggregate productivity and factor prices. Using Canada-US interregional trade data, we first estimate a system of theory-based gravity equations under the general equilibrium constraints generated by the model. Doing so allows us to measure 'border effects' and to decompose them into a 'pure' border effect, relative and absolute wage effects, and a selection effect. Using the estimated parameter values, we then quantify the impact of removing the Canada-US border on wages, productivity, mark-ups, the share of exporters, the mass of varieties produced and consumed, and thu
243. Trade, Wages, and Productivity [17.221%]
Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Sudekum (2008)
Downloadable! We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate productivity. Since wage and productivity responses are endogenous, our model is well suited to study the impacts of trade integration on aggregate productivity and factor prices. Using Canada-U.S. interregional trade data, we first estimate a system of theory-based gravity equations under the general equilibrium constraints generated by the model. Doing so allows us to measure "border effects" and to decompose them into a "pure" border effect, relative and absolute wage effects, and a selection effect. Using the estimated parameter values, we then quantify the impacts of removing the Canada-U.S. border on wages, productivity, markups, the share of exporters, the mass of varieties produced
244. Trade, Wages, and Productivity [17.220%]
Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Suedekum, Jens (2008)
Downloadable! We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate productivity. Since wage and productivity responses are endogenous, our model is well suited to study the impacts of trade integration on aggregate productivity and factor prices. Using Canada-U.S. interregional trade data, we first estimate a system of theory-based gravity equations under the general equilibrium constraints generated by the model. Doing so allows us to measure 'border effects' and to decompose them into a 'pure' border effect, relative and absolute wage effects, and a selection effect. Using the estimated parameter values, we then quantify the impacts of removing the Canada-U.S. border on wages, productivity, markups, the share of exporters, the mass of varieties produced and consumed, a
245. Why Has the Border Effect in the Japanese Market Declined? The Role of Business Networks in East Asia [17.112%]
Kyoji Fukao & Toshihiro Okubo (2004)
Downloadable! This paper analyzes the causes of the decline in Japan's border effect by estimating gravity equations for Japan's international and interregional trade in four machinery industries (electrical, general, precision, and transportation machinery). In the estimation, we explicitly take account of firms' networks. We find that ownership relations usually enhance trade between two regions (countries), and also find that we can explain 35% of the decline in Japan's border effect from 1980 to 1995 in the electrical machinery industry by the increase of international networks.
246. Trade and Migration to New Zealand [17.111%]
David Law & John Bryant & Murat Genc (2004)
Downloadable! This paper examines the hypothesis that a greater stock of migrants in New Zealand from a particular country leads to more trade between that country and New Zealand. The literature suggests that migrants can stimulate trade by lowering transaction costs, and by bringing with them preferences for goods produced in their home country. We use panel data techniques within the framework of a standard gravity model of trade. Our sample includes an average of over 170 countries for the years 1981 to 2001. Previous studies of trade and migration have not dealt satisfactorily with problems of unobserved heterogeneity and selection bias. We address these problems using correlated random effects and selection models. Results suggest that larger migrant stocks are associated with higher trade flows
247. Trade and Migration to New Zealand [17.111%]
John Bryant & Murat Genc & David Law (2004)
Downloadable! This paper examines the hypothesis that a greater stock of migrants in New Zealand from a particular country leads to more trade between that country and New Zealand. The literature suggests that migrants can stimulate trade by lowering transaction costs, and by bringing with them preferences for goods produced in their home country. We use panel data techniques within the framework of a standard gravity model of trade. Our sample includes an average of over 170 countries for the years 1981 to 2001. Previous studies of trade and migration have not dealt satisfactorily with problems of unobserved heterogeneity and selection bias. We address these problems using correlated random effects and selection models. Results suggest that larger migrant stocks are associated with higher trade flows.
248. The Determinants of Cross-Border Lending in the Euro Zone [16.938%]
Sylvia Heuchemer & Stefanie Kleimeier & Harald Sander (2009)
Downloadable (with restrictions)! We investigate the determinants of cross-border lending in the euro zone with a focus on the potentially limiting role of cultural and political factors. Employing a unique data set of European cross-border loans, the study uses various specifications of gravity models, which are subsequently augmented by societal proxies. Although trade-theoretic and financial development reasoning can explain part of the surge in cross-border lending, we demonstrate that distance and borders still matter. Moreover, we identify cultural differences and different legal family origin as important barriers to further integration in the euro zone.
249. The geography of trade in goods and asset holdings [16.878%]
Aviat, Antonin & Coeurdacier, Nicolas (2007)
Downloadable (with restrictions)! Gravity models have been widely used to describe bilateral trade in goods. Recently, Portes and Rey [1999] applied this framework to cross border equity flows and found that distance, which proxies information asymmetries in financial markets, is a surprisingly very large barrier to cross-border asset trade. We adopt here a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings. We jointly study trade in goods and banking assets in a simultaneous gravity equations framework using different instruments for both endogenous variables. To instrument trade in goods, we choose geographical variables (excluding distance) and data on bilateral transport costs. For asset holdings, we use legal similarities between countries and data on the international taxation of withheld capital. We find that the strong correlation between bilateral trade in goods and asset holdings is not simply due to distance: bilateral trade in good
250. EU Integration and Trade: a Look from the Outside of the EU Eastern Border? [16.610%]
Oleksandr Shepotylo (2009)
Downloadable! This paper develops a methodology for trade policy analysis of costs and benefits of alternative regional integration scenarios, based on the disaggregated gravity equation, and applies it to calculate the impact of the EU enlargement on integration strategies of non-member countries. In particular, the paper measures the impact of the 2004 EU enlargement from the standpoint of Ukraine – a country that has been lost in transition; Ukraine moves away from CIS, but does not get closer to EU. This angle allows estimating the costs of non-integration that occurred due to trade and investment diversion, and forgone opportunity to carry our structural changes in the Ukrainian economy. According to the results, EU accession would have had a small positive effect on total export volumes but would have dramatically changed the composition of Ukrainian exports by almost doubling exports of manufactured goods by 2007. The costs of non-integration accumulate towards the end of the investigated period. Pro
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Search for (border | home bias) trade gravity. Search results: border : 12780, bordering : 173, borderings : 0, bordered : 36, borderer : 0, borders : 3259, home : 24195, homely : 0, homing : 97, homed : 3, homer : 76, homers : 2, homes : 2417, bias : 28993, biasing : 197, biased : 8294, biases : 5325, biasness : 12, trade : 188418, trading : 36145, traded : 7679, trader : 1442, traders : 6966, trades : 4300, gravity : 5790, gravities : 1. Results 251-300 of 370. Search took 1.752 seconds
251. Banks in Space: Does Distance Really Affect Cross-Border Banking? [16.434%]
Katja Neugebauer (2011)
Downloadable! During the last years, gravity equations have leapt from the trade literature over into the literature on financial markets. Martin and Rey (2004) were the first to provide a theoretical model for cross-border asset trade, yielding a structural gravity equation that could be tested empirically. In this paper, I use a gravity model to evaluate factors that affect cross-border banking. Furthermore, I extend the baseline model to allow for third-country effects, which have been shown to matter for international trade, using spatial econometric techniques. I try to answer the following question: First, is there a spatial dimension in cross-border banking? Second, if so, has it changed over time, and third, what happens if this spatial dimension is ignored? I use bilateral data on cross-border banking assets for 15 countries, and I estimate cross-section regressions for each year. I find strong evidence for a spatial dimension in cross-border banking. Furthermore, the direct effect of distance decrea
252. Trade Facilitation and Manufactured Exports: Is Africa Different? [16.388%]
Iwanow, Tomasz & Kirkpatrick, Colin (2009)
Downloadable (with restrictions)! Summary Trade facilitation, defined as reducing the transaction costs associated with the enforcement, regulation and administration of trade policies, has been at the forefront of discussions on policy measures for reducing the costs of exporting and importing in developing countries. This study uses a new panel dataset for 124 developed and developing countries, available for the period 2003-04, to assess the impact of trade facilitation and other trade-related institutional constraints on manufacturing export performance with particular reference to Africa. We estimate a standard gravity model augmented with trade facilitation, regulatory quality, and infrastructure indicators. Our results show that trade facilitation reforms could contribute to improve export performance in Africa, but other reforms including the quality of the regulatory environment and the quality of the basic transport and communications infrastructure, are also needed. Furthermore, improvements in on-
253. Why trade facilitation matters to Africa ? [16.078%]
Portugal-Perez, Alberto & Wilson, John S. (2008)
Downloadable! This paper reviews data and research on trade costs for Sub-Saharan African countries. It focuses on: border-related costs, transport costs, costs related to behind-the border issues, and the costs of compliance with rules of origin specific to preferential trade agreements. Trade costs are, on average, higher for African countries than for other developing countries. Using gravity-model estimates, the authors compute ad-valorem equivalents of improvements in trade indicators for a sample of African countries. The evidence suggests that the gains for African exporters from improving the trade logistics half-way to the level in South Africa is more important than a substantive cut in tariff barriers. As an example, improving logistics in Ethiopia half-way to the level in South Africa would be roughly equivalent to a 7.5 percent cut in tariffs faced by Ethiopian exporters.
254. Trade Facilitation and the EU-ACP Economic Partnership Agreements: Who Has the Most to Gain? [15.962%]
Persson, Maria (2007)
The aim of the paper is to assess the potential benefits from trade facilitation in terms of increased trade flows both on average and specifically for the six regional groupings of ACP countries negotiating Economic Partnership Agreements (EPAs) with the EU. We use data from the World Bank’s Doing Business Database on the time required to export or import as indicators of cross-border transaction costs. A gravity model on two-way bilateral trade between 22 EU countries and 106 developing countries is estimated using a sample selection approach. We find that time delays both on the part of the exporter and the importer on average significantly decrease trade flows. We also find that this relationship is not linear: an extra day of waiting has smaller marginal effects if the time requirements are already high. On average, lowering border delays in the exporting country with one day from the sample mean would yield an export increasing effect of about 1 percent, while the same reduction in the importing count
255. Component Trade and China?s Global Economic Integration [15.898%]
Li, Kunwang & Song, Ligang & Zhao, Xingjun (2008)
Downloadable! China?s engagement in the so-called international fragmentation of production ? namely ?cross-border dispersion of component production/assembly within vertically integrated manufacturing industries? ? has become an increasingly important form of its economic integration into the regional as well as the global economy. The paper presents the recent trend of trade in parts and components between China and its main trading partners. Applying an adjusted gravity modelling method, the paper explores how China?s pattern of trade in parts and components is being determined. The paper found that China?s rapid economic growth, increasing market size and economies of scale, foreign direct investment and infrastructure development including transportation and telecommunications are important factors in explaining China?s rapid increase of bilateral trade in parts and components with its trading partners. The paper also found that the spatial distance and transportation costs have significant negative impa
256. A Spatial Theory of Trade [15.815%]
Esteban Rossi-Hansberg (2005)
Downloadable! The equilibrium relationship between trade and the spatial distribution of economic activity is fundamental to the analysis of national and regional trade patterns, as well as to the effect of trade frictions. We study this relationship using a trade model with a continuum of regions, transport costs, and agglomeration effects caused by production externalities. We analyze the equilibrium specialization and trade patterns for different levels of transport costs and externality parameters. Understanding trade via the distribution of economic activity in space naturally rationalizes the evidence on border effects and the "gravity equation."
257. Non-Europe : the magnitude and causes of market fragmentation in the EU [15.535%]
Keith Head & Thierry Mayer (2004)
Downloadable! In 1985 the European Commission diagnosed its member states as suffering from excessive market fragmentation, a state of affairs it later referred to as "Non-Europe". In response, the European Union launched an ambitious program to unify its internal market by removing non-tariff barriers. We examine the empirical basis for the Commission's diagnosis using a trade model derived from monopolistic competition. We then investigate the links between the initial size and subsequent evolution of border effects within the European Union. Our findings support the view that European consumers act as if imports from other members were subject to high non-tariff barriers. However, there appears to be almost no relation between market fragmentation and the barriers that were identified and removed by Europe's Single Market Programme.
258. Trade and the Global Recession [15.436%]
Sam Kortum & John Romalis & Brent Neiman & Jonathan Eaton (2010)
Downloadable! The World Trade Organization forecasts that the volume of global trade will in 2009 exhibit its biggest contraction since World War II. This large drop in international trade is generating significant attention and concern. Given the severity of the current global recession, is international trade behaving as we would expect? Or alternatively, is international trade shrinking due to factors unique to cross border transactions per se? This paper merges a global input-output model with a gravity trade structure in order to quantitatively answer these questions. The framework distinguishes a drop in trade resulting from a decline in the tradable good sector from a drop resulting from worsening trade frictions. We demonstrate empirically that given the geographic distribution and size of the decline in demand for manufactures, the overall decline in trade flows of manufactured goods is in fact larger than would be expected, though the scale of this deviation does not stand out as historically except
259. Financing Time to Trade : Evidence from French firms [15.304%]
Pauline Bourgeon & Jean-Charles Bricongne & Guillaume Gaulier (2012)
Downloadable! Using a very detailed set of French firms' data on trade flows and balance sheets, this paper analyses to what extent firms' financial frictions, considered as the interaction of financial dependence and financial constraints, and trading time affect their trade flows. In this empirical study the main indicator taken for firm's financial constraint, namely payment incident occurring at firm's partner is exogenous, whereas "traditional" financial indicators in other studies are not. The notion of trading time encompasses the whole time-lag between the production of export goods and the receiving of the revenues generated by these exports (time in transit, time at borders, etc.). In estimations, we both use distance as a proxy and a precise indicator computed by adding shipping time and average time spent at borders (only available for a sub-sample of extra-EU countries). The empirical results obtained so bring evidence that trading time amplifies the negative effect of financial restricti
260. Financing time to trade : Evidence from French firms [15.304%]
Pauline Bourgeon & Jean-Charles Bricongne & Guillaume Gaulier (2012)
Downloadable! Using a very detailed set of French firms' data on trade flows and balance sheets, this paper analyses to what extent firms' financial frictions, considered as the interaction of financial dependence and financial constraints, and trading time affect their trade flows. In this empirical study the main indicator taken for firm's financial constraint, namely payment incident occurring at firm's partner is exogenous, whereas "traditional" financial indicators in other studies are not. The notion of trading time encompasses the whole time-lag between the production of export goods and the receiving of the revenues generated by these exports (time in transit, time at borders, etc.). In estimations, we both use distance as a proxy and a precise indicator computed by adding shipping time and average time spent at borders (only available for a sub-sample of extra-EU countries). The empirical results obtained so bring evidence that trading time amplifies the negative effect of financial restricti
261. Falling walls and lifting curtains: analysis of border effects in transition countries [15.200%]
Yener Kandogan (2008)
Downloadable (with restrictions)! Since McCallum's (1995) finding of surprisingly high border effects on trade between the US and Canada, there have been a number of studies on other parts of the world, and improvements made to the gravity model to measure this effect accurately. This paper suggests some other modifications to the model, and applies it to a region of the world that presents a distinctly interesting case. Changes in border effects of formerly socialist countries in Central and East Europe, and countries in the former Soviet Union are analyzed during 1976-2002 at country and sectoral levels, and also with respect to blocs of countries. A discussion on cross-country variations in border effects follows the computations.
262. Changing trade patterns after conflict resolution in the South Caucasus [15.142%]
Polyakov, Evgeny (2001)
Downloadable! Since the breakup of the USSR, the South Caucasus region has experienced a range of political conflicts, resulting in a number of hot and cold wars and border closures. The author analyzes the probably short-term impacts of peace in the region as a result of a resolution of the conflict between Armenia and Azerbaijan over the Nagorney Karabakh region and an end to the associated trade blockades, with an emphasis on Armenia, Azerbaijan, and Georgia. The conflict has seriously distorted trade flows in the region, disrupted transport routes, and stifled export and import opportunities for Armenia and Azerbaijan. Georgia has enjoyed higher-than-normal transit through its territory. Trade has stopped in gas (from Azerbaijan to Armenia) and electricity (from Armenia to Turkey). Transport tariffs are unusually high, aggravated by government-imposed transit fees (taxes). Over time, trade restrictions have eased and trading partners have found ways to conduct trade despite closed borders and blockades--b
263. Intra-national versus international trade in the European Union: why do national borders matter? [14.944%]
Chen, Natalie (2004)
Downloadable (with restrictions)! Based on the estimation of a theoretically consistent gravity equation, together with a careful computation of transportation costs across countries and industries, the Paper first provides estimates of ‘border effects’ among EU countries. The second objective is to examine the reasons for border effects. Contrarily to the previous findings reported in the literature, we show that national trade barriers do provide an explanation. In particular, technical barriers to trade, together with firm and product-specific information costs, increase border effects, whereas non-tariff barriers are not significant. Our results however suggest that these barriers are not the only cause since the spatial clustering of firms is also shown to matter.<P>(This abstract was borrowed from another version of this item.)
264. The Changing Incidence of Geography [14.794%]
James E. Anderson & Yoto V. Yotov (2008)
Downloadable! Neglected properties of the structural gravity model offer a theoretically consistent method to calculate the incidence of estimated trade costs, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992-2003, incidence is on average some five times higher for sellers than for buyers. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in 'constructed home bias', the disproportionate share of local trade; and large but varying gains in real GDP. Aggregation biases gravity coefficients downward.
265. Structural Estimation of a Flexible Translog Gravity Model [14.643%]
Shawn Tan (2012)
Downloadable! How large are the gains from trade? Do all trade models have the ‘same old gains’? Arkolakis, Costinot, and Rodriguez-Clare (2012) show that many quantitative trade models that summarize trade responses via a single elasticity have the same welfare implications. I develop a flexible approach to estimating trade responses using a translog expenditure function, and find welfare results that differ starkly from conventional trade models. In my model, trade responses can vary bilaterally, and the link between own- and cross-price elasticities of trade to trade cost is broken. I apply my approach to inter-regional trade flows in North America and international trade flows between OECD and BRICS countries. I structurally estimate the parameters and conduct counterfactual analyses. Canada’s border effect is at least three times smaller than estimates in previous literature. Compared to those implied by the formula in Arkolakis et al., welfare responses are larger and more heterogeneous. The welfa
266. What Drives Capital Flows? The Case of Cross-Border M&A Activity and Financial Deepening [14.570%]
Julian di Giovanni & Contact: iber@haas.berkeley.edu (2003)
Downloadable! What macroeconomic and financial variables play key roles in the foreign direct investment decision (FDI) of firms? This question is addressed in this paper using a large panel data set of cross-border Merger & Acquisition (M&A) deals for the period 1990-1999. Various econometric specifications are built around the simple "gravity model" commonly used in the trade literature. Interestingly, financial variables and other institutional factors seem to play a significant role in M&A flows. In particular the size of financial markets, as measured by the stock market capitalization to GDP ratio and the credit provided to the private sector by financial institutions to GDP ratio in the domestic economy, have sizeable positive effects on the incentives for domestic firms to invest abroad.
267. What drives capital flows? The case of cross-border M&A activity and financial deepening [14.569%]
di Giovanni, Julian (2005)
Downloadable (with restrictions)! What macroeconomic and financial variables play key roles in the foreign direct investment decision (FDI) of firms? This question is addressed in this paper using a large panel data set of cross-border Merger & Acquisition (M&A) deals for the period 1990-1999. Various econometric specifications are built around the simple "gravity model" commonly used in the trade literature. Interestingly, financial variables and other institutional factors seem to play a significant role in M&A flows. In particular the size of financial markets, as measured by the stock market capitalization to GDP ratio and the credit provided to the private sector by financial institutions to GDP ratio in the domestic economy, have sizeable positive effects on the incentives for domestic firms to invest abroad.<P>(This abstract was borrowed from another version of this item.)
268. Analyzing the export flow from Texas to Mexico [14.560%]
Andrew J. Cassey (2010)
Downloadable! From 1997 to 2008, Texas shipped 40 percent of its manufacturing exports to Mexico. This puts Texas-Mexico among the largest state-country trading relationships. But this share has been declining recently. A gravity equation cannot account for either of these facts, even though Texas and Mexico share a border. This positive contiguity effect is not unique in state export data. I study the features of the Texas-Mexico relationship to try to account for the size of the export flow and the recent decline in share. Data limitations prevent a full accounting, but the most likely feature is the changing source of maquiladora inputs from the United States to Asia
269. India’s Export Potential to Other SAARC Countries: A Gravity Model Analysis [14.536%]
Sandeep Kaur & Paramjit Nanda (2010)
Downloadable (with restrictions)! India’s export potential to other SAARC nations (Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka) was calculated with the help of gravity model of exports using panel data methodology (pooled model, fixed effect model and random effect model) by taking the time period 1981-2005. To find out the convergence and divergence of India’s exports to SAARC members, speed of convergence was used. Moreover, study has also tried to find whether there is convergence of the actual data towards the estimated equilibrium. The study reveals that there was presence of convergence in India exports with SAARC countries and in the other words, actual India’s exports to SAARC countries converged towards the estimated export potential. Among SAARC countries, India’s export potential exists for Maldives, Bhutan, Pakistan and Nepal. India is the only SAARC member that shares land border with four members and sea border with two. No other SAARC country shares a common border with
270. Why Doesn't Africa Trade Regionally? [14.527%]
Mitchell, Lorraine (2005)
Downloadable! African countries do not tend to trade agricultural goods regionally, in contrast to other regions of the world. The current research uses a gravity model to consider several alternative hypotheses for this stylized fact. The results indicate that African countries tend to trade with countries that have similar diets, but also with countries that have comparative advantage in production and similar languages. Being landlocked reduces trade likelihood, but African countries seem similarly or more likely to import from bordering countries than nations in general. The model also overpredicts trade for most observations but underpredicts imports from middle income African importers.
271. Nontariff Barriers [14.497%]
Beghin, John C. (2006)
Downloadable! Nontariff barriers (NTBs) refer to the wide range of policy interventions other than border tariffs that affect trade of goods, services, and factors of production. Most taxonomies of NTBs include market-specific trade and domestic policies affecting trade in that market. Extended taxonomies include macro-economic policies affecting trade. NTBs have gained importance as tariff levels have been reduced worldwide. Common measures of NTBs include tariff-equivalents of the NTB policy or policies and count and frequency measures of NTBs. These NTB measures are subsequently used in various trade models, including gravity equations, to assess trade and/or welfare effects of the measured NTBs.
272. The Determinants of Cross-Border Equity Flows [14.434%]
Richard Portes & Helene Rey (1999)
Downloadable! We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information heavily determines the pattern of international transactions. Our model integrates elements of the finance literature on portfolio composition and the international macroeconomics and asset trade literature. Gross asset flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. The resulting augmented gravity' equation has equity market capitalisation representing market size and distance proxying some informational asymmetries, as well as a variable representing openness of each economy. But other variables explicitly represent information transmission (telephone call traffic and multinational bank branches), an information asymmetry between domesti
273. The determinants of cross-border equity flows [14.433%]
Portes, Richard & Rey, Helene (2005)
Downloadable (with restrictions)! We apply a new approach to a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information heavily determines the pattern of international transactions. Our model integrates elements of the finance literature on portfolio composition and the international macroeconomics and asset trade literature. Gross asset flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. The resulting augmented 'gravity' equation has equity market capitalisation representing market size and distance proxying some informational asymmetries, as well as a variable representing openness of each economy. But other variables explicitly represent information transmission (telephone call traffic and multinational bank branches), an information asym
274. A Re-evaluation of the Impact of Regional Agreements on Trade Patterns [14.303%]
Lionel Fontagne & Soledad Zignago (2007)
Downloadable! This article analyses the trade impact of preferential trade agreements (PTA). We firstly revisit the literature using a “traditional gravity” setting extended to rely on detailed data at the sector level (26 ISIC industries), using a panel of more than 100 countries between 1976-2000. Secondly we use the border effect methodology. Lastly, dyadic fixed effects make it possible to control for unobserved characteristics of country pairs, hence for the endogeneity of the PTA. We systematically disentangle the various arrangements and tentatively introduce tariffs. The positive trade impacts of the EU, NAFTA and ASEAN are downsized by such improvements.
275. Putting Per-Capita Income Back into Trade Theory [14.208%]
James R. Markusen (2010)
Downloadable! A major role for per-capita income in international trade, as opposed to simply country size, was persuasively advanced by Linder (1961). Yet this crucial element of Linder’s story was abandon by most later trade economists in favor of the analytically-tractable but counter-empirical assumption that all countries share identical and homothetic preferences. This paper collects and unifies a number of disjoint points in the existing literature and builds further on them using simple and tractable alternative preferences. Adding non-homothetic preferences to a traditional models helps explain such diverse phenomenon as growing wage gaps, the mystery of the missing trade, home bias in consumption, and the role of intra-country income distribution, solely from the demand side of general equilibrium. With imperfect competition, we can explain higher markups and higher price levels in higher per-capita income countries, and the puzzle that gravity equations show a positive dependence of trade on per-
276. Migration and Cross-Border Financial Flows [14.158%]
Maurice Kugler & Oren Levintal & Hillel Rapoport (2013)
Downloadable! The gravity model has provided a tractable empirical framework to account for bilateral flows not only of manufactured goods, as in the case of merchandise trade, but also of financial flows. In particular, recent literature has emphasized the role of information costs in preventing larger diversification of financial investments. This paper investigates the role of migration in alleviating information imperfections between home and host countries. We show that the impact of migration on financial flows is strongest where information problems are more acute (that is, for more informational sensitive investments and between more culturally distant countries) and for the type of migrants that are most able to enhance the flow of information, namely, skilled migrants. We interpret these differential effects as additional evidence pointing to the role of information in generating home-bias and as new evidence of the role of migration in reducing information frictions between countries.
277. Migration and Cross-Border Financial Flows [14.158%]
Maurice Kugler & Oren Levintal & Hillel Rapoport (2013)
Downloadable! The gravity model has provided a tractable empirical framework to account for bilateral flows not only of manufactured goods, as in the case of merchandise trade, but also of financial flows. In particular, recent literature has emphasized the role of information costs in preventing larger diversification of financial investments. This paper investigates the role of migration in alleviating information imperfections between home and host countries. We show that the impact of migration on financial flows is strongest where information problems are more acute (that is, for more informational sensitive investments and between more culturally distant countries) and for the type of migrants that are most able to enhance the flow of information, namely, skilled migrants. We interpret these differential effects as additional evidence pointing to the role of information in generating home-bias and as new evidence of the role of migration in reducing information frictions between countries.
278. Migration and Cross-Border Financial Flows [14.158%]
Kugler, Maurice & Levintal, Oren & Rapoport, Hillel (2013)
Downloadable! The gravity model has provided a tractable empirical framework to account for bilateral flows not only of manufactured goods, as in the case of merchandise trade, but also of financial flows. In particular, recent literature has emphasized the role of information costs in preventing larger diversification of financial investments. This paper investigates the role of migration in alleviating information imperfections between home and host countries. We show that the impact of migration on financial flows is strongest where information problems are more acute (that is, for more informational sensitive investments and between more culturally distant countries) and for the type of migrants that are most able to enhance the flow of information, namely, skilled migrants. We interpret these differential effects as additional evidence pointing to the role of information in generating home-bias and as new evidence of the role of migration in reducing information frictions between countries.
279. The Determinants of Cross-Border Equity Flows [14.127%]
Richard Portes & Hélène Rey (2001)
Downloadable! We explore a new panel data set on bilateral gross cross-border equity flows between 14 countries, 1989-96. We show that a "gravity" model explains international transactions in financial assets at least as well as goods trade transactions. Gross transaction flows depend on market size in both source and destination country as well as trading costs, in which both information and the transaction technology play a role. Distance proxies some information costs, and other variables explicitly represent information transmission, an information asymmetry between domestic and foreign investors, and the efficiency of transactions. The remarkably good results have strong implications for theories of asset trade. We find that the geography of information is the main determinant of the pattern of international transactions, while there is weak support in our data for the diversification motive, once we control for the informational friction. We strengthen our conclusions by investigating - in anoth
280. The EMU and German Cross-Border Portfolio Flows [14.121%]
Barbara Berkel (2006)
Downloadable! The paper analyzes the effect of European financial integration, especially of the EMU, on gross portfolio flows between Germany and 47 countries from 1987 to 2002. A gravity model of bilateral asset trade is estimated. The results reveal that there is substantially more portfolio trade between Germany and countries also participating in the EMU. This effect evolves smoothly over time. In particular in 2002, cross-border portfolio flows between Germany and EMU countries are significantly larger compared to flows between Germany and Denmark, the UK, and Sweden which are part of the EU-15 but not of the Euro area. Moreover, changes in exchange rate volatility, financial market development and increased real economic integration among EMU countries have significant effects on German gross portfolio flows, but they can not account for the positive effect on German gross portfolio flows due to the formation of the EMU. Finally, the EMU effect on gross portfolio flows is revealed to be larger for coun
281. The Home-Market Effect and Bilateral Trade Patterns: A Reexamination of the Evidence [14.073%]
Cong S. Pham & Mary E. Lovely & Devashish Mitra (2009)
Downloadable! In this paper, we reexamine closely the empirical evidence for the home-market effect (HME) found by Hanson and Xiang (American Economic Review, 2004). We first show that evidence for the HME from their difference-in-difference gravity equation is sensitive to the way the independent variable of interest (i.e. the log of the ratio of GDPs of exporter pairs) is created. Moreover, regardless of how the sample is configured, the HME is found only in particular sub-samples of country pairs. Second, we find no evidence of the HME when we estimate the difference-in-difference gravity model on a truncated sample of positive trade flows. We also find that the magnitude of the estimated HME is sensitive to the value imputed to zero trade flows. Monte Carlo simulations show that the truncated OLS, the Eaton-Tamura Tobit and the Heckman sample-selection estimators outperform (in terms of both the bias and variation of the gravity estimates) Hanson and Xiang’s difference-in-difference estimator. Truncated
282. What a Difference a Day Makes: An Estimate of Potential Gains from Trade Facilitation [13.617%]
Wilson, Norbert L.W. (2007)
Downloadable! The current paper uses a series of metrics of customs and administrative procedures produced by the World Bank to estimate gravity models. The metrics include estimates of the number of days at the border, the number signatures and the number of documents necessary for a product to cross the border of the importer and the exporter. Simulations using the estimated elasticities show that to improve trade reductions would need to be made in the different metrics. For the greatest benefits all trading partners would have to make the improvements. Additionally, some products are more sensitive to the metrics than others.
283. Falling Walls and Lifting Curtains: Analysis of Border Effects in Transition Countries [13.567%]
Yener Kandogan (2006)
Downloadable! Since McCallum’s (1995) finding of surprisingly high border effect on trade between US and Canada, there have been a number of studies on other parts of the world, and improvements made to the gravity model to accurately measure this effect. This paper suggests some other modifications to the model, and applies it to a region of the world that presents a distinctly interesting case. Changes in border effects of formerly socialist countries in Central and East Europe, and countries in the former Soviet Union are analyzed during 1976-2002 at country and sectoral levels, and also with respect to blocs of countries. A discussion on cross-country variations in border effects follows the computations.
284. Asymmetries in Heterogeneous Integrated Areas: Evidence from Intra-EU Sectoral Trade [13.507%]
Helena Marques (2008)
Downloadable! This paper estimates gravity models for both directions of trade between the EU-15 and the CEEC-10. The two groups form a heterogeneous integrated area (EU-27) with respect to country size, income levels, relative factor endowments and a different history of economic systems. The estimation was conducted on industries with different degrees of scale economies and factor-intensities in the presence of both spatial (distance and borders) and non-spatial (Eastern enlargements and Euro membership) trade costs. The results highlight the asymmetry in intra-bloc trade when the latter is heterogeneous: country size, income, factor endowments and the various trade barriers or facilitators are found to be significant determinants of intra-EU trade but to an extent that is country and industry-specific. The results also show how this heterogeneity eliminates the equivalence between exports and imports as the dependent variable in gravity models and makes the results sensitive to the definition of the bilat
285. Regional Trade Integration and Spatial Effects in the Euro-Mediterranean Zone [13.395%]
Mozhgan Moallemi & Shekofeh Farahmand (2005)
Downloadable! During recent years, regional economic integration has played a crucial role in the conduction of trade policies. Economic integration relies upon the concept of joint commercial policies within regions by which countries enable to promote their trade potentials. Basically, a new type of cooperation throughout new preferential trade agreements has emerged by economic blocks such as MERCOSUR, NAFTA, ASEAN and others. Now, there is an appropriate avenue for the nations of Euro-Mediterranean to deepen their economic relations and benefit from regional integration effects. The present paper makes attempt to indicate the impact of possible economic integration on the international trade flows of the Euro-Mediterranean countries. Accordingly, it uses a trade gravity model in order to explore main determinants that would significantly affect the trade flows of mentioned countries. To the end, an application of spatial econometric methods can assist us in obtaining relevant estimation results. The conti
286. Trade and Migration to New Zealand [13.388%]
John Bryant & Murat Genç & David Law (2005)
Downloadable! This paper examines the hypothesis that a greater stock of migrants in New Zealand from a particular country leads to more trade between that country and New Zealand. The literature suggests that migrants can stimulate trade by lowering transaction costs, and by bringing with them preferences for goods produced in their home country. We use panel data techniques within the framework of a standard gravity model of trade. Our sample includes an average of over 170 countries for the years 1981 to 2001. Previous studies of trade and migration have not dealt satisfactorily with problems of unobserved heterogeneity and selection bias. We address these problems using correlated random effects and selection models. Results suggest that larger migrant stocks are associated with higher trade flows.
287. The Role of Trade Facilitation in Central Asia [13.327%]
Jesus Felipe & Utsav Kumar (2012)
Downloadable (with restrictions)! With a decrease in formal trade barriers, trade facilitation has come into prominence as a policy tool for promoting trade. In this paper, we use a gravity model to examine the relationship between bilateral trade flows and trade facilitation. We also estimate the gains in trade derived from improvements in trade facilitation for the Central Asian countries. Trade facilitation is measured through the World Bank's Logistic Performance Index (LPI). Our results show that there have been significant gains in trade as a result of improving trade facilitation in the Central Asian countries. These gains in trade vary from 28 percent in the case of Azerbaijan to as much as 63 percent in the case of Tajikistan. Furthermore, intraregional trade has increased by 100 percent. Among the different components of the LPI, we find that the greatest increase in total trade comes from improvement in infrastructure, followed by logistics and efficiency of customs and other border agencies.
288. Intranational Trade Diversion, the Canada-United States Free Trade Agreement, and the L Curve [13.076%]
Coulombe Serge (2004)
Downloadable (with restrictions)! This paper provides an empirical analysis of the comparative evolution of intranational and international trade in the Canadian provinces since 1981. We establish a striking empirical fact, the L curve, that characterizes the comparative evolution of intranational (interprovincial) and international trade shares to GDP between 1981 and 2000. We also use a panel data model to evaluate the impact of changing trade costs induced by the CUSFTA on the intensity of international and interprovincial trade. The analysis casts doubt on the intranational trade diversion hypothesis, common in trade models such as the structural gravity model of Anderson and van Wincoop (2003) that was used recently to revisit the Canada–U.S. border effect. International trade appears to complement rather than substitute for interprovincial trade.
289. Modelo gravitatorio y turismo: Una aplicación a los flujos monetarios interregionales del sector Turismo en España [13.059%]
Tamara de la Mata & Carlos Llano (2010)
Downloadable! RESUMEN: Este trabajo analiza los flujos monetarios domésticos del sector Turismo en España mediante diferentes especificaciones del modelo gravitatorio, aplicados a tres estimaciones alternativas de los flujos monetarios bilaterales. Los modelos han permitido identificar las principales variables que actúan como factores de atracción de los flujos interregionales, obteniendo elasticidades diferentes para la variable distancia a las observadas en los flujos turísticos internacionales o en el comercio interregional español de bienes. También se muestra la gran importancia del comercio intrarregional y el comportamiento singular de los flujos interregionales entre regiones adyacentes. ABSTRACT: This work analyses the intra and interregional monetary flows generated by the Tourist sector within Spain, by means of different formulations of the gravity model and three alternative estimates of bilateral monetary flows. The models have also identified some important variables driving the interre
290. Towards a New Trade Policy Between the USA and Middle-East Countries:Estimating Trade Resistance and Export Potential [12.905%]
Nicolas Péridy (2005)
Downloadable (with restrictions)! At the time of the conclusion of free trade areas (FTAs) between the USA and Middle-East and North African (MENA) countries, there is a lack of literature concerning the measurement of the current US export position with regards to these countries, and the US export potential in this area. From recent developments of gravity models, this paper derives an estimable equation which includes various trade resistance variables, notably border effects, multilateral resistance as well as specific bilateral effects. The model is tested in order to scrutinise the impact of these variables on US exports to MENA countries, as well as the US export potential in this area. To that end, a selection of panel data specifications is proposed, mainly Hausman and Taylor models as well as Arellano and Bond dynamic models. Results unambiguously indicate that as compared to the other OECD countries, the USA suffers from a substantial trade integration deficit with MENA countries. This is reflected
291. Protectionist Responses to the Crisis: Damage Observed in Product-Level Trade [12.901%]
Bradley J. McDonald & Christian Henn (2011)
Downloadable! This paper investigates how trade flows are being affected by new discriminatory measures implemented during the global financial crisis. We match data on behind-the-border measures (e.g., bailouts and subsidies) and border measures implemented through April 2010 to monthly HS 4-digit bilateral trade data. Our estimation strategy relies on a first-differenced gravity equation and time-varying fixed effects to disentangle the impact of new discriminatory measures. Trade in exporter-importer pairs subject to new measures decreased by 5 to 8 percent relative to trade in the same product among pairs not subject to new measures. These product-level results imply global trade declines at the aggregate level of about 0.2 percent, or $30-35 billion a year. These aggregate figures would be higher, if one third of measures had not been excluded due to incomplete data. The paper then goes on to dissect protectionism’s trade impact by disaggregating measures by type, advanced/developing countries, regions
292. The Internationalization of Inventive Activity: A Gravity Model Using Patent Data [12.831%]
Picci, Lucio (2009)
Downloadable! This paper discusses the extent and the determinants of the internationalization of European inventive activity, between 1990 and 2005, using an innovative method to treat the information contained in the European Patent Office's Patstat database. We introduce a new set of indicators measuring internationalized patent applications that are fully coherent with the principle of fractional counting. The observed level of internationalization of inventive activities, while being rather low, has steadily increased over time. The amount of collaboration between actors residing in different countries is assessed by means of a gravity model. The amount of bilateral collaboration is positively affected by the presence of a common language, a common border and by more similar cultural characteristics. International collaboration is negatively affected by distance, with estimated elasticities that are significantly smaller than the ones that characterize international trade.
293. The internationalization of inventive activity: A gravity model using patent data [12.820%]
Picci, Lucio (2010)
Downloadable (with restrictions)! This paper discusses the extent and the determinants of the internationalization of European inventive activity, between 1990 and 2005, using an innovative method to treat the information contained in the European Patent Office's Patstat database. We introduce a new set of indicators measuring internationalized patent applications that are fully coherent with the principle of fractional counting. The observed level of internationalization of inventive activities, while being rather low, has steadily increased over time. The amount of collaboration between actors residing in different countries is assessed by means of a gravity model. The amount of bilateral collaboration is positively affected by the presence of a common language, a common border and by more similar cultural characteristics. International collaboration is negatively affected by distance, with estimated elasticities that are significantly smaller than the ones that characterize international trade.
294. Rose effect versus border effect: the Euro's impact on trade [12.815%]
Gianluca Cafiso (2011)
Downloadable (with restrictions)! The purpose of this article is to test the common finding of a positive 'Rose Effect' (RE) in the case of the Euro through a comparison with an indicator of integration among the Euro Zone (EZ) countries: the 'Border Effect' (BE). This study of the Euro's impact using both the RE and the BE is a novelty in the literature. Our findings cast doubts about the supposed trade-costs reduction caused by the Euro, reduction which is the main explanation of the positive RE estimated in several works. Both indicators are estimated by means of a gravity model for bilateral trade flows using a panel of manufacture exports and production figures.
295. Patterns and Determinants of Cross-border Financial Asset Holdings in East Asia [12.720%]
Lee, Jong-Wha (2008)
Downloadable! This paper analyzes the patterns and determinants of financial integration in East Asia by using the data set of cross-border holdings of financial assets such as equity portfolio, long-term and short-term debt securities, and bank claims. Empirical analysis based on the gravity model of bilateral international asset holdings shows that financial integration among East Asian economies, particularly in equity and debt securities, is relatively lower than in Europe. A large part of regional financial integration in East Asia is due to heavy intra-regional trade in goods-after controlling for bilateral trade volume, East Asia's relatively lower regional integration becomes apparent. The relative lack of financial integration is due largely to underdeveloped financial infrastructure, a low level of capital account liberalization, and higher exchange volatility.
296. Complementarity between Bilateral Trade and Financial Integration [12.674%]
Shin, Kwanho & Yang, Doo Yong (2006)
Downloadable! This paper explores the complementarities between bilateral trade in goods and financial assets. By utilizing a gravity model specification with an extended dataset in terms of time span and asset classification as well as alternative instrumental variables, we confirm the existence of positive evidence for complementarities. We find that common factors such as bilateral distance and other economic size variables that determine both cross-border trade and financial flows contribute to complementarity. However, the fact that the estimated coefficients of distance for financial transactions are about half the size of those for trade in goods suggests that physical distance is less important for financial transactions. Furthermore, the significance of distance in explaining bilateral transactions disappears when trade is added as an additional explanatory variable, indicating that distance may not directly influence financial flows. Finally, we also find that there exists another important factor t
297. Asymmetries in heterogeneous integrated areas: Evidence from sectoral trade between old and new EU members [12.620%]
Helena Marques (2011)
Downloadable (with restrictions)! This article estimates gravity models for both directions of trade between the EU-15 and the NMS-10. The two groups form a heterogeneous integrated area (EU-27) with respect to country size, income levels, relative factor endowments and a different history of economic systems. The estimation was conducted on industries with different degrees of scale economies and factor intensities in the presence of both spatial (distance and borders) and non-spatial (Eastern enlargements and Euro membership) trade costs. The results highlight the asymmetry in intra-bloc trade when the latter is heterogeneous: country size, income, factor endowments and the various trade barriers or facilitators are found to be significant determinants of trade between old and new EU members to an extent that is specific to different country and industry groups. The results also show how this heterogeneity eliminates the equivalence between exports and imports as the dependent variable in gravity models and
298. Why trade facilitation matters to Africa [12.353%]
Portugal-Perez, Alberto & Wilson, John S. (2009)
Downloadable! This paper reviews data and research on trade costs for Sub-Saharan African countries. It focuses on: border-related costs, transport costs, costs related to behind-the border issues, and the costs of compliance with rules of origin specific to preferential trade agreements. Trade costs are, on average, higher for African countries than for other developing countries. Using gravity-model estimates, the authors compute ad-valorem equivalents of improvements in trade indicators for a sample of African countries. The evidence suggests that the gains for African exporters from improving the trade logistics half-way to the level in South Africa is more important than a substantive cut in tariff barriers. As an example, improving logistics in Ethiopia half-way to the level in South Africa would be roughly equivalent to a 7.5 percent cut in tariffs faced by Ethiopian exporters.<P>(This abstract was borrowed from another version of this item.)
299. Disintegration and Trade [12.283%]
Jan Fidrmuc & Jarko Fidrmuc (2003)
Downloadable (with restrictions)! The gravity model is used to assess the impact of disintegration on trade among the former constituent republics of three demised federations in central and eastern Europe: the Soviet Union, Yugoslavia, and Czechoslovakia. The authors find evidence of a very strong home bias around the time of disintegration, with trade exceeding normal trade intensity 24-fold (for Slovenia and Croatia) to 43-fold (the former Soviet Union and Czechoslovakia). Disintegration was followed by a sharp fall in trade intensity, although the legacy of a common past remains strong. By 1998, trade relations still exceeded the normal level 2-fold in the case of Slovenia and Croatia, 7-fold for the former Czechoslovakia, 13-fold for the Baltics, and 30-fold for Belarus, Russia, and Ukraine. Such trade intensities surpass the effects of formal preferential trade areas such as the EU or the impact of reunification on trade between East and West Germany. Copyright Blackwell Publishing Ltd 2003.
300. Specialisation: Pro and Anti-Globalizing 1990-2002 [12.146%]
James E Anderson, James E; Yotov, Yoto V. (2010)
Downloadable! Specialization alters the incidence of trade costs to buyers and sellers, with pro-and anti-globalizing effects on 76 countries from 1990-2002. The structural gravity model yields measures of Constructed Home Bias and the Total Factor Productivity effect of changing incidence. A bit more than half the world's countries experience declining constructed home bias and rising real output while the remainder of countries experience rising home bias and falling real output. The effects are big for the outliers. A novel test of the structural gravity model restrictions shows it comes very close in an economic sense.
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Search for (border | home bias) trade gravity. Search results: border : 12780, bordering : 173, borderings : 0, bordered : 36, borderer : 0, borders : 3259, home : 24195, homely : 0, homing : 97, homed : 3, homer : 76, homers : 2, homes : 2417, bias : 28993, biasing : 197, biased : 8294, biases : 5325, biasness : 12, trade : 188418, trading : 36145, traded : 7679, trader : 1442, traders : 6966, trades : 4300, gravity : 5790, gravities : 1. Results 301-350 of 370. Search took 1.699 seconds
301. Regional and international trade of Armenia: Perspectives and potentials [12.037%]
Hayrapetyan Grigor & Hayrapetyan Viktoriya (2011)
Downloadable! Unfavorable geopolitical situation and small scale of economy, trade balance deficit and raw-materials export enforce Armenia to look for new geographical and product perspectives in its foreign trade. Our paper aims to estimate trade potential for Armenia by product groups in regional and international directions using gravity approach. Applied gravity model estimates trade flows, which are disaggregated into 7 groups according to BEC’s 1-digit classification, between 139 countries during 2003-2007. Our key findings imply that trade relations of Armenia with most of main trade partners have no potential to develop. Armenia has exceeded its export potential almost with all the CIS countries. Trade relations with the EU countries should be re-considered on both product and geographical directions. Re-opening of Armenian-Turkish border could provide significant economic benefit for Armenian exporters. The most perspective product groups of Armenian export seem to be “Industrial supplies”,
302. Tariffs and other trade costs: assessing obstacles to Mediterranean countries' access to EU-15 fruit and vegetable markets [11.886%]
Charlotte Emlinger & Florence Jacquet & Emmanuelle Chevassus Lozza (2008)
Downloadable (with restrictions)! This paper evaluates the role of tariffs in the overall trade barriers faced by Mediterranean countries that export fruit and vegetables to the European Union (EU), using a gravity model. With an annual specification, we measure the border effect faced by the Mediterranean countries on entering EU markets and show that trade costs other than transport costs and tariffs seriously hinder exports from Mediterranean countries. A second specification analyses the impact of seasonality on tariff sensitivity. Periods of the year during which liberalisation could have a greater impact on trade are identified. Oxford University Press and Foundation for the European Review of Agricultural Economics 2009; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org, Oxford University Press.
303. FDI versus cross-border financial services: The globalisation of German banks [11.693%]
Buch, Claudia M. & Lipponer, Alexander (2004)
Downloadable! The choice between foreign direct investment (FDI) and exports has been a recurrent theme in the literature on international trade, yet few studies have analysed this choice at the level of the individual firm. This paper uses a new dataset to study the FDI-versus-exports decision for banks. We use data on the foreign direct investment stocks and the cross-border provision of financial services of German banks for the period 1997-2000 to describe the regional pattern of banks' international activities. We find that country- and bank-specific variables capturing size have a major impact on banks' foreign activities. The results are consistent with the hypothesis that the realisation of economies of scale and the provision of trade-related finance shape globalisation patterns. Greater cultural and geographical distance, by contrast, potentially limit the international expansion of banks. Our results also suggest that FDI and cross-border services are complements rather than substitutes. --
304. Une analyse critique des mesures de restriction aux échanges de services [11.447%]
Isabelle Rabaud & Thierry Montalieu (2012)
Downloadable (with restrictions)! Trade in services covers four modes of supply: cross-border trade, consumption abroad, commercial presence and presence of natural persons. Thus, impediments to trade in services involve the regulatory framework. Domestic reforms are at stake to provide falling prices and technology transfers arising from trade liberalisation for forward using industries. We look at the way gravity equations explain the determinants of trade in services and how they permit to assess the gain arising from the removal of impediments to trade. First, we criticise the measurements of barriers to trade in services. We then show that if gravity equations provide a good fit for international transactions in services, they tend to overestimate the impacts of impediments to trade in services and thus the growth of exports and fdi inflows occurring from liberalisation. Classification JEL : F13, F14, F53, L8
305. Market Structure and Market Access [11.413%]
Joseph Francois & Ian Wooton (2010)
Downloadable (with restrictions)! Abstract We explore an issue at the nexus of domestic competition policy and international trade, the interaction between goods trade and market power in domestic trade and distribution sectors. We examine the effect of variations in conditions of domestic competition in services on trade volumes in goods in the cases of both linear and nonlinear import demand, including standard form CES-based gravity models of bilateral trade flows. Theory suggests a set of linkages between service-sector pricing and goods trade supported by econometrics involving imports of 22 OECD countries vis-a-vis 69 exporters. Competition in distribution services affects the volume of trade in goods. Additionally, because of interaction between tariffs and pricing, the market structure of the domestic service sector becomes increasingly important as tariffs are reduced. Indeed, depending on the degree of competition, market access concessions on tariffs may be effectively undone in some cases by chang
306. TRADE THROUGH FDI: investing in services [10.978%]
Carmen Fillat-Castej—n & Joseph Francois & Julia Woerz (2008)
Downloadable! The type of relationship between different modes of trading services across international borders is of great interest, not only for the academic literature but also for the formulation trade liberalization offers under the GATS. Even more than for trade in goods, it is thus important to know whether cross-border trade and trade through commercial presence abroad act as complements or substitutes in services. The most commonly used analytical tool in the empirical analysis of this question is the gravity model of trade. This paper offers a consistent theoretical foundation for the application of the gravity model to services and to commercial presence, using a composite demand model with offers testable hypothesis about the complementary or substitutive relationship between different modes of supply. It further links the results to policy variables like market regulations which may act directly or implicitly as barriers to trade. Our empirical test for the sample of OECD countries over the decad
307. The Changing Incidence of Geography [10.873%]
James E. Anderson & Yoto V. Yotov (2008)
Downloadable! The incidence of bilateral trade costs is calculated here using neglected properties of the structural gravity model, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992- 2003, incidence is on average some five times higher for sellers than for buyers. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in 'constructed home bias', the disproportionate predicted share of local trade; and large but varying gains in real GDP.
308. The Changing Incidence of Geography [10.870%]
James E. Anderson & Yoto V. Yotov (2010)
Downloadable (with restrictions)! The incidence of bilateral trade costs is calculated here using neglected properties of the structural gravity model, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992-2003, sellers' incidence is on average some five times higher than buyers' incidence. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in "constructed home bias," the disproportionate predicted share of local trade; and large but varying gains in real GDP. (JEL F11, F14, R12)
309. Gravity in International Finance [10.697%]
Yohei Okawa & Eric van Wincoop (2010)
Downloadable! The past decade has witnessed an explosion of papers estimating gravity equations for cross-border financial holdings. The aim of the paper is to develop a theoretical foundation for the empirical gravity literature applied to finance. The gravity specification is closely analogous to that developed for goods trade, even though it is based on a very different type of theory. We show how the theory can be used to estimate international financial frictions and conduct comparative statics analysis with respect to changes in these frictions. We use a dataset for cross-border equity holdings among 24 industrialized countries to illustrate these results.
310. Intra-European Trade of Manufacturing Goods : An extension of the Gravity Model [10.674%]
Marc VANCAUTEREN & Daniel WEISERBS (2005)
Downloadable! In this paper, we propose and test several extensions of the standard gravity model. This yields a specification that allows for (i) a more flexible income response; (ii) a competitiveness effect with a general and a specific component; and (iii) an alternative and consistent measure of remoteness. Those extensions were found to be significant factors to explain intra-EU trade. Next, we analyze the effect of EU harmonization of technical regulations on domestic and intra-EU trade. We find, at different levels of aggregation of the manufacturing sector, that harmonization of regulations has contributed to more intra-EU trade but, apparently, did not affect the so called border effect.
311. Is the EU internal market suffering from an integration deficit? [10.573%]
Pacchioli, Consuelo (2011)
Downloadable! As an alternative to measuring the extent of market integration, ‘home-bias’ indicates the degree to which economic agents ‘over-prefer’ to transact with domestic agents rather than agents from other EU countries. Such an exclusive preference is measured against a benchmark of (ideal) market integration and is called ‘home-bias’. This CEPS Working Document by former CEPS Researcher Consuelo Pacchioli addresses the estimation of a ‘normal tradegravity equation to establish the possible existence of home-bias effects in the US market and the EU internal market, which are the two most integrated regions in the world. Estimations based on pooled OLS cross-section analysis, with the novelty of the inclusion of time dummies in order to obtain unique indexes and panel data-fixed effects, both reject the hypothesis of no internal barrier to trade. This shows a tendency to ‘over-trade’ within borders both in the US and the EU. Taking the finding for the US market as a benchmark, a d
312. Determinants of Foreign Direct Investment in Transition Economies: With particular Reference to Macedonia's Performance [10.268%]
Merita Zulfiu (2008)
Downloadable! Using a panel dataset of bilateral flows of foreign direct investment (FDI), we study the determinants of FDI in transition economies, with particular reference to Macedonia?s performance. As many transition countries, Macedonia has a low FDI potential and performance. The empirical work confirms the expectation of the positive feedback effect of past FDI onto current FDI. We do not have enough large dataset to say that all other variables, such as the GDP of the host and source country, unit labour cost, trade, inflation, legal environment, distance, and dummy variables capturing the language, common border and colonizing effect, do not have an effect on FDI stocks. Our suggestion is that all the econometric findings on the determinants of FDI in transition economies using small dataset and static models should be accepted only with caution.
313. Cultural Distance and Bilateral Trade [9.880%]
Cyrus Teresa L. (2012)
Downloadable (with restrictions)! This paper examines the extent to which cultural proximity influences, and is influenced by, bilateral trade flows. Variables measuring common language or religion, commonly considered to be measures of cultural proximity, have been found to be highly significant in explaining the volume of trade between countries, but these measures have the distinct disadvantage of being static; they do not change over time. In fact, however, culture does change, possibly in response to exposure to the foreign goods, methods, and ideas brought across borders by trade; the cultural "distance" between two countries can therefore be seen to fall or rise over time. In this paper, responses to World Values Survey questions regarding trust, respect, control, and obedience are used to create a measure of cultural distance. I use this cultural distance variable in gravity regressions and show that more culturally-distant countries trade less, but that more traditional measures of culture ar
314. Evidence on Financial Globalization and Crisis: Geographic/Bilateral External Balance Sheets [9.854%]
Sá, P. (2010)
Downloadable! This article reviews the main sources of data on the geographic composition of countries' external balance sheets, covering both international and country-specific sources. It examines the determinants of bilateral financial assets and liabilities and discusses how gravity models, traditionally used in the trade literature, have been applied to explain bilateral financial links. A new dataset is used to derive some stylized facts on how bilateral financial links look like, how they have evolved over time and how they compare with trade links. The role that cross-border financial links play in the international transmission of shocks is discussed, with reference to the 2007-2009 financial crisis.
315. Epidemic trade [9.832%]
Börner, Lars & Severgnini, Battista (2011)
Downloadable! This paper studies the spread of the Black Death as a proxy for the ow of medieval trade between 1346 and 1351. The Black Death struck most areas of Europe and the wider Mediterranean. Based on a modified version of the gravity model, we estimate the speed (in kilometers per day) of transmission of the disease between the transmitting and the receiving cities. We find that the speed depends on distance, political borders, and on the political importance of a city. Furthermore, variables related to the means of transportation like rivers and the sea, religious seasons such as Lent and Advent, and geographical position are of substantial significance. These results are the first to enable us to identify and quantify key variables of medieval trade ows based on an empirical trade model. These results shed new light on many qualitative debates on the importance and causes of medieval trade. --
316. Explaining Stock Market Correlation: A Gravity Model Approach [9.793%]
Flavin, Thomas J & Hurley, Margaret J & Rousseau, Fabrice (2002)
Downloadable (with restrictions)! A gravity model, frequently used to explain trade patterns, is used to explain stock market correlations. The main result of the trade literature is that geography matters for goods markets. Physical location and trading costs should be less of an issue in asset markets. However we find that geographical variables still matter when examining equity market linkages. In particular, the number of overlapping opening hours and sharing a common border tends to increase cross-country stock market correlation. These results may stem from asymmetrical information and investor sentiment, lending some empirical support for these explanations of the international diversification puzzle. Copyright 2002 by Blackwell Publishers Ltd and The Victoria University of Manchester
317. Epidemic Trade [9.769%]
Lars Boerner & Battista Severgnini (2012)
Downloadable! This paper studies the spread of the Black Death as a proxy for the intensity of medieval trade ows between 1346 and 1351. The Black Death struck most areas of Europe and the wider Mediterranean. Based on a modi ed version of the gravity model, we estimate the speed (in kilometers per day) of transmission of the disease between the transmitting and the receiving cities. We find that the speed depends on distance, political borders, and on the political impor- tance of a city. Furthermore, variables related to the means of transportation like rivers and the sea, religious seasons such as Advent, and geographical position are of substantial significance. These results are the rst to enable us to identify and quantify key variables of medieval trade ows based on an empirical trade model. These results shed new light on many qualitative debates on the importance and causes of medieval trade.Length: 40 pages
318. Why Has the Border Effect in the Japanese Machinery Sectors Declined? The role of business networks in East Asian machinery trad [9.441%]
Kyoji Fukao & Toshihiro Okubo (2011)
Downloadable! This paper analyzes the impact of firm networks on Japan's national border effect. We estimate gravity equations using data on Japan's international and interregional trade in four machinery industries (electrical, general, precision and transportation machinery). The machinery sector is the most important manufacturing sector for exports and outward foreign direct investment (FDI) in Japan. By taking into account international as well as interregional firm networks, we find that ownership relations usually enhance exports from parent firms to establishment. Consequently we can explain 15% (7%, 1% and 0.5%) of the decline in Japan's border effect from 1980 to 1995 in precision (transportation, general electrical) machinery sector by the increase of international networks.
319. Social Consequences of Transition and European Integration Processes in the Baltic States [9.378%]
Tiiu Paas (2003)
Downloadable! The paper focuses on studying economic integration of the countries that are involved in the EU eastward enlargement process giving emphasis on international trade. The main feature characterizing the EU eastward enlargement processes is integration of national economies with different historical backgrounds and structures. Regionalism is an important issue in the policy agenda influencing adjustment processes with the EU enlargement of the current members (EU15) and the candidate countries (CC12). The regional integration effects as the deviations from the volume of trade predicted by the baseline gravity model are analyzed in the paper. The empirical results of the study allow us to conclude that the behaviour of bilateral trade flows within the countries involved in the EU eastward enlargement accords to the normal rules of gravitation, having statistically significant spatial biases caused by the trade relations between the Baltic Rim countries (the BR bias) and the border countries (the bor
320. Determinants of Trade with Solar Energy Technology Components: Evidence on the Porter Hypothesis? [9.310%]
Felix Groba (2011)
Downloadable! Studies analyzing renewable energy market development usually investigate additional capacity or investment. Characteristics, roles and determinants of cross border trade with renewable energy system components remain blurred. Environmental regulation and renewable energy policies are important in promoting renewable energy use. Yet, the effect of respective policies on determining exports remains ambiguous. The Porter hypothesis and the lead market literature argue that environmental regulation leads to a comparative export advantage. Empirical studies testing both hypotheses reach diverging conclusions and rarely focus on the renewable energy sector. Using solar energy technology components, this study adds to the literature by explaining exports of environmental technologies. The analysis uses a gravity trade model and a unique panel dataset to test the role of renewable energy policies on environmental technology exports from OECD countries and to describe structure and development of intern
321. Continental Trading Blocs: Are They Natural or Supernatural? [9.155%]
Jeffrey A. Frankel & Ernesto Stein & Shang-Jin Wei (1998)
Downloadable! Using the gravity model, we find evidence of three continental trading blocs: the Americas, Europe and Pacific Asia. Intra-regional trade exceeds what can be explained by the proximity of a pair of countries, their sizes and GNP/capitas, and whether they share a common border or language. We then turn from the econometrics to the economic welfare implications. Krugman has supplied an argument against a three-bloc world, assuming no transport costs, and another argument in favor, assuming prohibitively high transportation costs between continents. We complete the model for the realistic case where intercontinental transport costs are neither prohibitive nor zero. If transport costs are low, continental Free Trade Areas can reduce welfare. We call such blocs super-natural. Partial liberalization is better than full liberalization within regional Preferential Trading Arrangements, despite the GATT's Article 24. The super-natural zone occurs when the regionalization of trade policy exceeds what is j
322. Why don't Asians invest in Asia. The determinants of cross-border portfolio holdings [8.908%]
Alicia Garcia Herrero & Philip Woolbridge & Doo Yong Yang (2009)
Downloadable! This paper seeks to understand why Asian foreign investment is concentrated in financial markets outside of the region instead of in Asian markets. We analyse empirically the geographical composition of the cross-border portfolio holdings of more than 40 source countries. We compare these benchmark results with those of four subgroups: advanced industrial economies; emerging market economies; European economies; and Asia-Pacific economies. The lack of liquidity in Asian financial markets turns out to be one reason why Asian capital is invested predominantly outside the region, notwithstanding the short distances and large trade flows between Asian economies. Initiatives to improve the liquidity of Asian financial markets, therefore, may be a useful way to stimulate financial integration within the region.
323. Speed Money: Time, Corruption, and Trade [8.886%]
Shepherd, Ben (2009)
Downloadable! This paper shows that longer trade times are associated with higher levels of trade-related corruption, consistent with a theoretical framework in which “fast” producers earn higher profits than “slow” ones, but may have to pay “speed money” to possibly corrupt customs officials. This finding is robust to the use of corruption measures based on perceptions and reported behavior, the inclusion of a wide range of control variables from the previous literature, and estimation by a variety of methods including instrumental variables. Moreover, results from a gravity model show that the combination of slow border procedures and rampant corruption acts as a significant drag on international trade, in line with the model's predictions: the elasticity of bilateral trade with respect to trade time is around 5% stronger in a country with rampant corruption compared with a corruption free country. Together, these results suggest that improved trade facilitation can be an effective and feasible
324. Assessing Barriers to Trade in Services in India: An Empirical Investigation [8.718%]
De, Prabir (2013)
Downloadable! International trade in services has become more important in recent years as advances in technology have permitted new means of providing services across borders. Services have emerged as crucial economic activities in India, more prominently over the last decade. Apart from providing the bulk of employment and income in India, the services sector also serves as a vital input for producing other goods and services. While a large part of India’s services sector is untapped and rarely explored by the international market, a growing number of barriers have been impeding India’s international market access in the services sector. In this article, we performed a gravity analysis of the linkages between India’s services trade flow and its probable barriers. The estimated results show that a 1 per cent improvement in services trade facilitation measures would lead to a 2 per cent rise in services exports in India. The paper concludes that improved trade facilitation may help unlock unrealized ser
325. APEC 2020: Connectivity and Trade Performance: Concept and Its Evidence from APEC Economies [8.646%]
Maddaremmeng A. Panennungi (2013)
Downloadable! Connectivity is one of the specific agenda in APEC summit 2013 in Indonesia. Physical connectivity is one of the pillars among three pillar of connectivity. Infrastructures are very important to facilitate connectivity, namely logistics. This paper is aimed at (i) exploring the relation between logistics (both domestic and international logistics) and trade performance by using gravity model; (ii) developing the logistics cost index (Domestic Logistics Cost Index and International Logistics Cost Index) which is based on economic logic of gravity model; (iii) showing the empirical evidence of the relation between the export performance and the new logistics cost index in APEC economies; (iv) Understanding the selected case of cross border and inside the border connectivity development including its challenges. Some interesting findings are shown in the following: First, the extension of gravity model shows that logistics that consist of domestic and international logistics have positive relation
326. Growth Of Intermediate Goods Trade In East Asia [8.614%]
Kazunobu Hayakawa (2007)
Downloadable (with restrictions)! This paper examines what contributes to the trade growth of intermediate machinery goods in East Asia in the 1990s. To this end, this paper regresses the input allocation equation to obtain the estimator of border barriers in each country, and then, by using the estimators, the first difference logarithmic form of the gravity equation is regressed. Our empirical results suggest that reduction in border barriers and the production and expenditure growth of intermediate goods are important factors which contribute to the rapid growth of trade in machinery parts in East Asia. Copyright 2007 The Author Journal compilation 2007 Blackwell Publishing Ltd
327. The Impact Of Technical Barriers On Us-Eu Agro-Food Trade [8.266%]
Nardella, Michele & Boccaletti, Stefano (2003)
Downloadable! Controversial aspects exist in the current debate on the application of Non Tariff Measures (NTMs) on agro-food trade. This study intends to offer an evaluation of the trade impact of both non-technical and technical NTMs on the US-EU bilateral trade, the two major players in WTO negotiations. The results show two main structural differences between the EU and US borders: technical NTMs are preferred in the US, while in the EU the opposite is true; agro-food imports in the US face a number of NTMs more than double that of the EU. Gravity model estimates confirm the negative impact of NTMs on trade. However, safety technical requirements seem to have a positive effect on trade, probably as a consequence of lower transaction, monitoring and enforcing costs.
328. How Much Does Violence Tax Trade? [8.219%]
S. Brock Blomberg & Gregory D. Hess (2004)
Downloadable! We investigate the empirical impact of violence as compared to other trade impediments on trade flows. Our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999, which brings together information from the Rose [2004] dataset, the ITERATE dataset for terrorist events, and datasets of external and internal conflict. We explore these data with traditional and theoretical gravity models. We calculate that, for a given country year, the presence of terrorism, as well as internal and external conflict is equivalent to as much as a 30 percent tariff on trade. This is larger than estimated tariff-equivalent costs of border and language barriers and tariff-equivalent reduction through GSPs and WTO participation.
329. Understanding Long-run Price Dispersion [8.120%]
Mario J. Crucini & Hakan Yilmazkuday (2013)
Downloadable (with restrictions)! We use a unique panel of retail prices spanning 123 cities in 79 countries from 1990 to 2005, to uncover six novel properties of long-run international price dispersion. First, at the PPP level, virtually all (91.6%) of price dispersion is attributed to service-sector wages, consistent with a dominant role of the retail distribution margin. Second, at the level of individual goods and services, the average contribution of service-sector wages is significantly reduced, one-third as large (31.9%). This reflects the fact that good-specific sources of price dispersion, such as trade costs and good-specific markups, tend to average out across goods. Third, at the LOP level, borders and distance contribute about equally to price dispersion with distance elasticities consistent with the existing trade gravity literature which links trade volumes (rather than relative prices) to borders and distance. Fourth, in the cross-section, price dispersion is rising in the distribution share c
330. Understanding Long-run Price Dispersion [8.120%]
Mario J. Crucini & Hakan Yilmazkuday (2013)
Downloadable! We use a unique panel of retail prices spanning 123 cities in 79 countries from 1990 to 2005, to uncover six novel properties of long-run international price dispersion. First, at the PPP level, virtually all (91.6%) of price dispersion is attributed to service-sector wages, consistent with a dominant role of the retail distribution margin. Second, at the level of individual goods and services, the average contribution of service-sector wages is significantly reduced, one-third as large (31.9%). This reflects the fact that goodspecific sources of price dispersion, such as trade costs and good-specific markups, tend to average out across goods. Third, at the LOP level, borders and distance contribute about equally to price dispersion with distance elasticities consistent with the existing trade gravity literature which links trade volumes (rather than relative prices) to borders and distance. Fourth, in the cross-section, price dispersion is rising in the distribution share consistent with the no
331. Trade through FDI: investing in services [7.528%]
Carmen Fillat Castejón & Joseph F. Francois & Julia Woerz (2008)
Downloadable! The type of relationship between different modes of trading services internationally is of great interest, both for the academic literature and for liberalization policies under the GATS, because cross-border and commercial presence abroad might complement or substitute each other. This paper offers a consistent theoretical foundation for the application of the gravity model to services trade, using a composite demand model yielding testable hypothesis about that complementary or substitutive relationship and linking the results to market regulations as trade barriers. For the OECD countries over 1994-2004 a robust complementary effects in the short-run is found, reinforced in the long-run by an increased potential for cross-border imports bases on pervious FDI inflows, highlighting business, communication and financial services.
332. Complementarity among international asset holdings [7.071%]
Hahm, Joon-Ho & Shin, Kwanho (2009)
Downloadable (with restrictions)! By utilizing a unique dataset and employing a variant of gravity models, we find strong evidence for the presence of complementarities among bank loans, short- and long-term debts, and portfolio equity holdings. The complementarities can be partially explained by common factors of standard gravity models such as economy size, state of economic development, and information cost proxies (such as distance), as well as bilateral trade in goods. However, we find an additional direct channel of complementarities among financial asset holdings that cannot be explained by these gravity factors. The complementarities are also robust to the consideration of unobserved fixed effects of both source and destination countries. We find evidence that the sequential reinforcing impact of bank lending on portfolio asset holdings is greater than the impact of portfolio asset holdings on bank lending. We also find that bank loans lead to subsequent portfolio asset holdings by partially alleviati
333. Determinants of FDI in transition countries and estimation of the potential level of Croatian FDI [6.956%]
Drazen Derado (2013)
Downloadable! In a global economy, foreign direct investment (FDI) represents the main form of international business activities. More than the mere cross-border movement of capital, FDI includes transfer of technology and know-how, thus contributing to competitiveness, employment and trade, and consequently, economic growth and the development of the local economy. The recent drop in international capital flows resulting from global financial and economic crisis has caused concerns regarding growth prospects for the world economy in general and that of less advanced transition countries in particular. By hypothesizing that Croatia, as the next member of the EU, has realized sub-optimal effects in attracting FDI, and that international competition in this field is expected to grow further, the aim of the paper is to find out determining factors behind inward FDI to transition countries, in order to detect the capacities of Croatia in hosting new foreign investment. Statistical analysis, focusing on bilateral
334. A South American Perspective: Regional versus Global Trade Patterns [6.916%]
Diego Agudelo & Galia Julieta Benitez & Larry Davidson (2006)
Downloadable! This study presents evidence of the increasing regionalization of the international trade of ten South American countries from 1980 to 2001. We found that the regionalization of trade in South America is best described as an increasing trade among Spanish-speaking countries and increasing trade within the two regional agreements: Andean Community and Mercosur. We also find evidence of border erosion in the continent, especially among the Mercosur members. These results are evident in a simple statistical analysis and are also economically significant when tested in a consistent gravity equation that controls for a set of macroeconomic and geographic variables.
335. Deleveraging from Emerging Markets. The Case of Euro-area Banks [6.884%]
Alicia Garcia-Herrero & Fielding Chen (2013)
Downloadable! This paper shows stylized facts on the rather large retrenchment of cross-border lending by Euro-area banks into emerging markets. The clearest case is Asia where Euro-area banks have massively lost market share. The reason, however, is not only related to their retrenching but also to the surge in lending from others banks, especially from Emerging Asia. As a second step, we investigate empirically the determinants of cross-border bank flows with a gravity model and differentiate across Euro-area, US and Asian banks. We find a number of home factors behind the retrenchment in lending. Two are common to all home countries analyzed, namely global risk aversion and trade which, respectively, discourage and foster banks’ overseas lending. Other factors, however, are specific of Euro-area banks, such as the higher cost of funding which is found to discourage lending while poor economic growth tends to foster it. The latter result would indicate that economic weakness of the last few years may
336. Toward a North American Security Perimeter? Assessing the trade, FDI, and welfare impacts of liberalizing 9/11 security measures [6.844%]
Georges, Patrick & Mérette, Marcel (2012)
Downloadable (with restrictions)! This paper examines the trade, FDI, and welfare impacts of (liberalizing) 9/11 security measures at the Canada–US border. First, the study provides econometric estimates of the impact of post 9/11 security measures on bilateral (US–Canada) trade flows. Second, we compute sectoral tariff rates “equivalent” to the 9/11 security measures using these econometric estimates together with a three-region nine-sector general equilibrium model. Finally, we assess for both the Canadian and the US economies: 1) the (general equilibrium) impacts on trade, FDI, and welfare, of (liberalising) the 9/11 US security measures and 2) the economic impacts of a change of security paradigm toward a North American Security Perimeter within a Customs Union that would liberalize the Canadian and US 9/11 security measures at the Canada–US border and shift them at the external security perimeter.
337. EU Integration and Production Networks: Evidende from Spain [6.602%]
Leticia Blazquez & Carmen Díaz-Mora & Rosario Gandoy (2011)
Downloadable! The aim of this paper is to advance knowledge of Spain’s participation in international production networks using data on trade in parts and components from 1990 to 2006. Data analysis shows a remarkable dynamism of Spanish trade in P&C, both in imports and exports, being capable of keeping their shares despite the intense competition from less developed countries. Additionally, Spanish participation in networks is mostly in Europe. In fact, Spain has maintained itself as one of the primary destinations of European P&C exports and has been the only economy that has improved its position as a supplier. These facts allow us to infer a significant competitive capacity of the Spanish economy in Europe, for both production and assembly of P&C. The EU enlargement to Eastern European countries seems not to have damaged Spanish competitiveness as an assembler. In order to analyse the nature of Spanish participation in production networks, we estimate the determinants of trade
338. Do south-south trade agreements enhance member countries' trade? evaluating implications for development potential in the contex [6.602%]
Das, Gouranga & Bhattacharya, Swapan K. (2009)
Downloadable! The South Asian Association for Regional Cooperation (SAARC) is the least integrated economy in the Asia-Pacific region, whose intraregional trade was only 5.6 per cent in 2006. In order to estimate potential trade of the SAARC Member Countries (SMCs), we have estimated “behind the border” and “beyond the border” constraints, which both appear to be quite significant in all SMCs. Given the level of “beyond the border” constraints, in the absence of full information on all “behind the border” constraints, the combined effect of the latter on actual exports of individual SAARC country is modeled in the gravity equation, which is estimated using the methods suggested in the literature for estimating stochastic frontier production function. Results of the stochastic frontier gravity model show that when FTA among SAARC countries becomes fully operational, smaller members will gain maximum benefits compared to larger members. The paper also analyses the synergy between trade and devel
339. Specialization: Pro- and Anti-globalizing, 1990-2002 [6.581%]
James E. Anderson & Yoto V. Yotov (2010)
Downloadable! Specialization alters the incidence of manufacturing trade costs to buyers and sellers, with pro-and anti-globalizing effects on 76 countries from 1990-2002. The structural gravity model yields measures of Constructed Home Bias (the ratio of predicted local trade to predicted frictionless local trade) and the Total Factor Productivity effect of changing incidence. A bit more than half the world's countries experience declining CHB and rising TFP. The effects are big for the outliers. A novel test of structural gravity provides striking confirmation, validating both the CHB and TFP measures that rely on it here, and the large gravity literature that relies on it elsewhere.
340. How Much Does Violence Tax Trade? [6.525%]
S. Brock Blomberg & Gregory D. Hess (2006)
Downloadable (with restrictions)! We investigate the empirical effect of violence, as compared to other trade impediments, on trade flows. Our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999, which brings together information from the Rose data set, the iterate data set for terrorist events, and data sets of external and internal conflict. We explore these data with traditional and theoretical gravity models. We calculate that, for a given country year, the presence of terrorism together with internal and external conflict is equivalent to as much as a 30% tariff on trade. This is larger than estimated tariff-equivalent costs of border and language barriers and tariff-equivalent reduction through generalized systems of preference and WTO participation. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
341. The determinants of cross-border consolidation in eight Asian countries: Before and after the Asian financial crisis [6.487%]
Shen, Chung-Hua & Lin, Mei-Rong (2011)
Downloadable (with restrictions)! This paper studies the motivation that drives financial institutions to engage in cross-border M&A activity in eight Asian countries before and after the 1997 financial crisis. Five hypotheses are examined, namely, the gravity hypothesis, the following the client hypothesis, the market opportunity hypothesis, the information cost hypothesis and the regulatory restriction hypothesis. The first conclusion concerns those proxies which are effective in both periods. DISTANCE has a negative impact in both periods, thus supporting the gravity hypothesis. The following the client hypothesis is supported in both periods, too, but only when TRADE is employed as the proxy. The gap in terms of regulatory barriers between two countries, when proxied by the differences in the regulatory quality, has a positive impact in both periods, also supporting the gravity hypothesis. Next, some determinants are found to be only effective before the Asian crisis. For example, the stock return has
342. The Role of Geography in Financial and Economic Integration: A Comparative Analysis of Foreign Direct Investment, Trade and Port [6.430%]
Selen Sarisoy Guerin (2006)
Downloadable (with restrictions)! The objective of this paper is to examine the role of geography in explaining the patterns of financial and economic integration among both developed and developing countries. Using a gravity model, we compare North-North, North-South and South-North FDI, trade and portfolio investment flows to examine how geographical factors influence these bilateral flows. The results indicate that the impact of geography variables on FDI and portfolio are similar to their effect on trade. Geography variables have a statistically significant effect both on FDI and portfolio investment, but FDI is more sensitive to distance. We interpret the negative effect of distance as the existence of information costs in financial flows. Also bilateral FDI, trade and portfolio investment flows react to macroeconomic fundamentals in the same way, however, with different degrees of sensitivity. There are significant differences between North-North and North-South flows. Our results find support for the a
343. Analytics of the Trade Restrictiveness of SPS Regulations: Reconciling Standards and Competitiveness [6.427%]
C Nalin Kumar (2008)
This paper attempts to review the key issues related to the quantification of the trade effects of standards, especially the Agreement on Sanitary and Phytosanitary Standards (SPS) on agro-food exports. After reviewing some of the key empirical studies on the topic, the paper goes further and examines the later trends in the gravity framework. It is argued that dependence on only one model may not reflect all the theoretically or otherwise attributed border effects on the export performance of the commodity. The paper projects constant market share analysis as a complement to the gravity model, which algebraically isolates the competitiveness effect of exports and gives a better understanding of the various components, export performance, trade flows and export markets. The paper therefore concludes that a more comprehensive assessment of the impact is possible, but it requires a desirable blend of gravity and algebraic methods.
344. Unlocking the Value of Cross-Border Mergers and Acquisitions [6.334%]
Steven Brakman & Gus Garita & Harry Garretsen & Charles van Marrewijk (2008)
Downloadable! Most FDI takes place between the developed countries, which suggests that the market-seeking motive is important for understanding FDI. However, given the stylized fact that trade barriers (e.g. transportation costs and financial barriers) have declined over the past 20 years, models that aim to explain market-seeking FDI tend to predict a decline in FDI. Neary (2008) offers two explanations for this puzzle: (1) the export platform motive (where firms gain access to an integrated market by investing in one of the “integrated” countries); (2) Neary’s (2007) GOLE model, which explains cross-border mergers and acquisitions (this model is of interest since most FDI comes in the form of M&As). By using a gravity framework, where we also deal with the “zero gravity problem”, we confirm the predictions of the GOLE model.
345. The Causal Impact of Common Native Language on International Trade: Evidence from a Spatial Regression Discontinuity Design [6.317%]
Egger, Peter & Lassmann, Andrea (2013)
Downloadable (with restrictions)! This paper studies the causal effect of sharing a common native language on international trade. Switzerland is a multilingual country that hosts four official language groups of which three are major (French, German, and Italian). These groups of native language speakers are geographically separated, with the corresponding regions bordering countries which share a majority of speakers of the same native language. All of the three main languages are understood and spoken by most Swiss citizens, especially the ones residing close to internal language borders in Switzerland. This unique setting allows for an assessment of the impact of common native (rather than spoken) language as a cultural aspect of language on trade from within country-pairs. We do so by exploiting the discontinuity in various international bilateral trade outcomes based on Swiss transaction-level data at historical language borders within Switzerland. The effect on various margins of imports is positive an
346. A gravity analysis of international stock market linkages [6.085%]
Terence Tai-Leung Chong & Wing-Keung Wong & Juan Zhang (2011)
Downloadable (with restrictions)! The last decade has witnessed a marked improvement in information technology. Such an improvement has reduced the information cost for market participants. Thus, whether the influence of geographic factors on international financial linkage is still significant nowadays is an important question yet to be addressed. This article develops a gravity model of international financial linkages. Using the panel data of bilateral cross-country stock market correlations of 23 countries, it is found that the correlations are negatively associated with the Great Circular Distance (GCD) between the financial centres of these countries and positively associated with the duration of overlapping trading hours among stock exchanges and the colonial links between countries. However, whether the countries share a common border or language does not affect the stock market correlations.
347. Dual' gravity: Using spatial econometrics to control for multilateral resistance [5.819%]
Kristian Behrens & Cem Ertur & Wilfried Koch (2007)
Downloadable! We propose a quantity-based 'dual' version of the gravity equation that yields an estimating equation with both cross-sectional interdependence and spatially lagged error terms. Such an equation can be concisely estimated using spatial econometric techniques. We illustrate this methodology by applying it to the Canada-U.S. data set used previously, among others, by Anderson and van Wincoop (2003) and Feenstra (2002, 2004). Our key result is to show that controlling directly for spatial interdependence across trade flows, as suggested by theory, significantly reduces border effects because it captures 'multilateral resistance'. Using a spatial autoregressive moving average specification, we find that border effects between the U.S. and Canada are smaller than in previous studies: about 8 for Canadian provinces and about 1.3 for U.S. states. Yet, heterogeneous coefficient estimations reveal that there is much variation across provinces and states.
348. ‘Dual’ Gravity: Using Spatial Econometrics To Control For Multilateral Resistance [5.819%]
Kristian Behrens & Cem Ertur & Wilfried Koch (2012)
We propose a quantity-based "dual" version of the gravity equation that yields an estimating equation with both cross-sectional interdependence and spatially lagged error terms. Such an equation can be concisely estimated using spatial econometric techniques. We illustrate this methodology by applying it to the Canada-U.S. data set used previously, among others, by Anderson and van Wincoop (2003) and Feenstra (2002, 2004). Our key result is to show that controlling directly for spatial interdependence across trade flows, as suggested by theory, significantly reduces border effects because it captures "multilateral resistance". Using a spatial autoregressive moving average specification, we find that border effects between the U.S. and Canada are smaller than in previous studies : about 8 for Canadian provinces and about 1.3 for U.S. states. Yet, heterogeneous coefficient estimations reveal that there is much variation across provinces and states.<P>(This abstract was borrowed from anot
349. The Determinants of African Tourism [5.669%]
Johan Fourie & Maria Santana-Gallego (2011)
Downloadable! Using a standard panel gravity equation of 175 origin/destination countries between 1995 and 2008, 37 of which are African, we identify the factors that drive African-inbound (arrivals to Africa from other continents) and within-African tourism (arrivals from and to an African country). We find that the determinants of African-inbound and within-African tourism are not all that different from global tourism flows; repeat tourism, income, distance, land area and the standard dummy variables not only drives global or OECD tourism, but also tourism within Africa, disproving the belief that African tourists "differ substantially". Not only does the growth in tourism over the last decade provide encouraging signs for the continent, but these results show that policy makers can now play an active role in promoting African tourism, both from outside but especially from within the continent's borders.
350. Determinants of the Negative Impact of Being Landlocked on Trade: An Empirical Investigation Through the Central Asian Case [5.628%]
Ga�l Raballand (2003)
Downloadable (with restrictions)! In this paper, the impact of land-lockedness on trade is estimated for a panel database using a gravity approach. By first examining Central Asian economies, it appears that land-lockedness implies a high transport cost burden. In a second step, the impact of land-lockedness on trade has been measured using four measures of being landlocked: the first estimation is obtained by introducing a dummy variable, the second estimate uses the shortest distance between a land-locked country and the nearest major port facility, the third measure represents the number of borders with coastal countries and the fourth is the number of national borders crossed. From over 10,000 observations, using a sample of 46 countries over a 5-year period, we conclude that being landlocked would reduce trade by more than 80&percnt; when measured by a dummy variable. Using the Cheng and Wall econometric approach, we find that the four measures are confirmed empirically. Finally, evidence shows that
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Search for (border | home bias) trade gravity. Search results: border : 12780, bordering : 173, borderings : 0, bordered : 36, borderer : 0, borders : 3259, home : 24195, homely : 0, homing : 97, homed : 3, homer : 76, homers : 2, homes : 2417, bias : 28993, biasing : 197, biased : 8294, biases : 5325, biasness : 12, trade : 188418, trading : 36145, traded : 7679, trader : 1442, traders : 6966, trades : 4300, gravity : 5790, gravities : 1. Results 351-370 of 370. Search took 1.721 seconds
351. Estimating the Effects of Kyoto on Bilateral Trade Flows Using Matching Econometrics [5.535%]
Rahel Aichele & Gabriel Felbermayr (2013)
Downloadable (with restrictions)! Many Kyoto countries fear a loss of competitiveness due to unilateral climate policyefforts; policymakers therefore call for carbon-related border tax adjustments. With thispaper we attempt to estimate the treatment effect of Kyoto commitment on bilateralexport flows using regression-adjusted differences-in-differences matching techniques.The gravity and international environmental agreement formation literatures provideguidelines for the choice of matching variables. We find that Kyoto countries' exportsare reduced by 13–14% due to Kyoto commitment. Trade effects are largest in energyintensive,homogeneous industries such as iron and steel, non-ferrous metals, organicand inorganic chemicals but also in machinery and equipment.<P>(This abstract was borrowed from another version of this item.)
352. The NAFTA Agreement and Market Integration Among Canada, US and Mexico: The Role of Non-Tariff Measures [5.014%]
Nardella, Michele & Boccaletti, Stefano (2005)
Downloadable! The aim of this study is to evaluate the impact of non-tariff measures (NTM) on NAFTA agro-food trade comparing the measures implemented at the borders of participating countries, Canada, United States and Mexico, and evaluating the impact of those NTM still implemented within the NAFTA area on agro-food market integration by estimating different gravity models for the agro-food industry as a whole and for particularly relevant product categories. The overall results from the gravity model offer a measure of the impact of the different types of technical provisions and of the different degree of application of the same measure, on the agro-food trade in the NAFTA area. The picture emerging from the estimates is quite complex: overall, a net trade creation effect seems to prevail, even though the results cannot be unambigously generalized, because they are conditional to product groups and country-specific measures.
353. Explaining cross-border large-value payment flows: evidence from TARGET and EURO 1 data [4.983%]
Rosati, Simonetta & Secola, Stefania (2005)
Downloadable! We analyse the distribution of the TARGET cross-border interbank payment flows, from both a cross-section and time series point of view, using average daily data for the period 1999-2002. We find out that first, “location matters”, in the sense that bilateral payment flows seem to reflect an organisation of interbank trading between countries whereby the size of the banking sectors, geographical proximity and cultural similarities play a significant role. This result is confirmed also by a model developed drawing on the gravity models literature. Second, we find that the payment traffic in TARGET is strongly affected by market technical deadlines. In addition, such traffic is positively related mainly to the liquidity conditions and to the turnover of the euro area money market, (particularly the unsecured overnight segment). Our model also provides a good explanation of the determinants of the interbank payments settled in the EURO 1 system. JEL Classification: E58, G20, G21
354. Complementarity among International Asset Holdings: Do Banks Have a Special Role? [4.599%]
Hahm, Joon-Ho & Shin, Kwanho (2006)
Downloadable! This paper studies the pattern and structure of cross-border bilateral financial asset holdings. By utilizing an extended dataset and employing a variant of gravity models, we find strong evidence for the presence of complementarities among bank loans, shortand long-term debts, and portfolio equity holdings. The complementarities can be explained by common factors of standard gravity models such as economy size, state of development, and information cost proxies, as well as bilateral trade in goods and services. However, we also find the presence of a direct channel of complementarities among financial asset holdings that cannot be explained by these gravity factors. We proceed to investigate whether the complementarities can be characterized by the models that predict a special role of banks in alleviating information asymmetry. We find supporting evidence for this hypothesis in that international bank lending tends to increase the volume of portfolio asset holdings. This acceleration effect of
355. Measuring the Width of National Boarders [3.994%]
Helliwell, John F (2002)
Downloadable (with restrictions)! The paper deals with three issues that are central to the combined use of intranational and international data to estimate the economic consequences of national borders. The first issue concerns the measurement of trading distances for transactions that take place within a country or region. The second issue relates to the use of coefficients from an estimated gravity relationship to express the border effect in terms of an equivalent distance. The author proposes a technique to avoid problems that have beset earlier attempts to do this. The third issue is the need to ensure that the border and distance effects are estimated independently. Copyright 2002 by Blackwell Publishing Ltd.
356. Impact du Commerce bilatéral Intra-Zone dans la zone UEMOA et CEMAC: Approche par les VAR Structurels [3.669%]
Dramani, Latif & Laye, Oumy (2007)
Downloadable! ABSTRACT In this article, we empirically try to answer the second hypothesis on the theory of the ZMO developed by Mc Kinnon (1963), while working on a sample of the countries of the franc zone. We found on the assets of the gravity models to put in evidence the existing monetary union impact on the bilateral trade flux. In order to measure the effects of the monetary union on the intra zone trade, we call on, a structural VAR, to which is associated the method of space state model assessment with the aim of distinguishing the impact of an economic policy shock in a group of country in open economy. Our sample is constituted in this particular case of the 12 countries of the zone franc; seven countries of the UEMOA zone and five countries of the CEMAC zone. The originality of the approach is based on the fact that we tempt an endogeneisation of the flux of bilateral trade of every country in this analysis. The results of our investigations show a sensitive reduction of the effects borders, an im
357. Testing Mundell's Intuition of Endogenous OCA Theory [3.657%]
Warin, Thierry & Wunnava, Phanindra V. & Janicki, Hubert (2008)
Downloadable! This paper presents an empirical assessment of the endogenous optimum currency area theory. Frankel and Rose (1998) study the endogeneity of a currency union through the lens of international trade flows. Our study extends Frankel and Rose's model by using FDI flows to test the original theory developed by Mundell in 1973. A gravity model is used to empirically assess the effectiveness of the convergence criteria by examining location specific advantages that guide multinational investment within the European Union. A fixed effects model based on a panel data of foreign direct investment (FDI) flows within the EU-15 shows that horizontal investment promotes the diffusion of the production process across the national border. Specifically, our results suggest that economic convergence ensured by belonging to the common currency area helps double FDI flows.
358. The role of non-tariff measures in EU dairy trade with Russia [2.698%]
Jan Pokrivcak & Siemen van Berkum & Lenka Drgova & Marian Mraz & Pavel Ciaian (2013)
Downloadable (with restrictions)! This article investigates Russian non-tariff measures (NTMs) on dairy products and their implications for EU dairy exports. Based on survey results, numerous and detailed Russian standards on imported dairy products are considered by respondents as redundant and unnecessary from a food safety perspective. Conformity assessment procedures are identified as a major problem when exporting to Russia. They are non-transparent, time-consuming and expose exporters to significant risk that their products may be refused entry at the Russian border. Audits by Russian inspectors seem to be subject to arbitrary rules and exporting companies face great uncertainty because of unclear and often changing rules. Both fixed and variable costs may increase due to Russian non-tariff measures, adding an estimated 5--10% of export value to costs. The gravity model estimates indicate that, after controlling for other variables, non-tariff measures are more restrictive on US exports to Russia than o
359. Regional welfare effects of the European Monetary Union [2.453%]
Bröcker, Johannes (2004)
Downloadable! This paper estimates welfare effects resulting from reduced transaction costs in international trade, using a static multiregional general equilibrium model. The kernel of the model is the trade part specified in Dixit-Stiglitz-style. Interregional trade shows a gravity pattern due to transaction costs depending on distance. Transaction cost reductions brought about by EMU are based on econometric estimates by GLICK and ROSE, relying on trade intensification following the establishment of other currency unions worldwide. According to our results EMU could imply a welfare gain for the participating countries amounting to 1% of GDP annually. Our simulation results show that this concern that the spatial effect of EMU might contradict the cohesion objectives of the European Union is not to be substantiated. Regions close to the borders are supposed to have the highest trade intensities with partner countries and therefore gain most from saving of transaction costs in international trade. --
360. Migration Creation and Diversion in the EU: Are CEECs Immigrants Crowding-out the Rest? [2.425%]
Helena Marques (2005)
Downloadable! This paper applies the concept of trade creation and diversion to immigration into the EU-15 in the 1980s and 1990s. In particular, the 1990s process of East-West integration, culminating in the May 2004 enlargement, could potentially create immigration from the new member countries and at the same time divert migration from non-EU countries. In this context, the question this paper tries to answer is fundamentally whether the extension of the EU Single Market to the new member countries has the potential to crowd-out non-EU immigrants. The analysis is carried out using trend analysis, Truman shares, and panel data gravity models. The results are quite robust to a range of regression methods, model specifications, dependent variables, and time periods. They broadly support the migration creation hypothesis, but the evidence on the migration diversion hypothesis is mixed. There is evidence of some diversion away from other non-member European countries, such as ex-USSR and ex-Yugoslavia countries
361. Estimating the effects of Kyoto on bilateraltrade flows using matching econometrics [2.182%]
Rahel Aichele & Gabriel J. Felbermayr (2011)
Downloadable! Many Kyoto countries fear a loss of competitiveness due to unilateral climate policyefforts; policymakers therefore call for carbon-related border tax adjustments. With thispaper we attempt to estimate the treatment effect of Kyoto commitment on bilateralexport flows using regression-adjusted differences-in-differences matching techniques.The gravity and international environmental agreement formation literatures provideguidelines for the choice of matching variables. We find that Kyoto countries' exportsare reduced by 13–14% due to Kyoto commitment. Trade effects are largest in energyintensive,homogeneous industries such as iron and steel, non-ferrous metals, organicand inorganic chemicals but also in machinery and equipment.
362. China and the TPP: A Numerical Simulation Assessment of the Effects Involved [1.834%]
Chunding Li & John Whalley (2012)
Downloadable (with restrictions)! The Trans-Pacific Partnership (TPP) is a new negotiation on cross border liberalization of goods and service flows going beyond WTO disciplines and focused on issues such as regulation and border controls. Though the US, Australia and other pacific countries are included, China is notable for its exclusion from the process thus far. This paper uses numerical simulation methods to assess the potential effects of a TPP agreement on China and the other participating countries. We use a numerical five-country global general equilibrium model with trade costs and monetary structure incorporating inside money to allow for impacts on trade imbalances. Trade costs are calculated using a method based on gravity equations. Simulation results reveal that China will be hurt by TPP initiatives, but the negative effects are relatively small given the geographical and commodity composition of China’s trade. Other non-TPP countries will be hurt but member countries will all gain. Japan’s
363. Common currencies and FDI flows [1.782%]
Stefano Schiavo (2007)
Downloadable (with restrictions)! The paper investigates the impact of EMU on foreign direct investment flows. Using the option value approach to investment decisions, it is possible to show that exchange rate uncertainty hinders cross-border investment flows. By permanently fixing bilateral exchange rates, a currency union can then be expected to spur international investment. Results from a gravity model on a sample of OECD countries confirm the hypothesis that currency unions have a positive impact on FDI; moreover, adopting the same currency appears to do more than merely eliminating exchange rate volatility. These findings closely resemble those recently obtained in the trade literature. Copyright 2007 , Oxford University Press.
364. The Determinants of Multinational Banking during the First Globalization, 1870-1914 [1.769%]
Stefano Battilossi (2006)
Downloadable! What determined the multinational expansion of European banks in the pre-1914 era of globalization? And how were banks’ foreign investments related to other facets of the globalizing world economy such as trade and capital flows? The paper reviews both the contemporary and historical literature, and empirically investigates these issues by using an original panel data based on a sample of more than 50 countries. The dependent variable, aiming at measuring the intensity of cross-border activities operated by banks from foreign locations, is the number of foreign branches and subsidiaries of British, French and German banks. Explanatory variables are mainly selected on the base of the eclectic theory of multinational banking, but also include geographical factors (as suggested by gravity models) and institutional indicators advanced by recent studies inspired by new institutional economics, such as legal families and adherence to the Gold Standard. These regressors captures the impact of economi
365. Margins of international banking: is there a productivity pecking order in banking, too? [1.719%]
Buch, Claudia M. & Koch, Cathérine Tahmee & Koetter, Michael (2009)
Downloadable! Modern trade theory emphasizes firm-level productivity differentials to explain the cross-border activities of non-financial firms. This study tests whether a productivity pecking order also determines international banking activities. Using a novel dataset that contains all German banks' international activities, we estimate the ordered probability of a presence abroad (extensive margin) and the volume of international assets (intensive margin). Methodologically, we enrich the conventional Heckman selection model to account for the self-selection of banks into different modes of foreign activities using an ordered probit. Four main findings emerge. First, similar to results for non-financial firms, a productivity pecking order drives bank internationalization. Second, only a few non-financial firms engage in international trade, but many banks hold nternational assets, and only a few large banks engage in foreign direct investment. Third, in addition to productivity, risk factors matter for int
366. Margins of International Banking: Is there a Productivity Pecking Order in Banking, too? [1.719%]
Claudia M. Buch & Cathérine Tahmee Koch & Michael Kötter (2009)
Downloadable! Modern trade theory emphasizes firm-level productivity differentials to explain the cross-border activities of non-financial firms. This study tests whether a productivity pecking order also determines international banking activities. Using a novel dataset that contains all German banks’ international activities, we estimate the ordered probability of a presence abroad (extensive margin) and the volume of international assets (intensive margin). Methodologically, we enrich the conventional Heckman selection model to account for the self-selection of banks into different modes of foreign activities using an ordered probit. Four main findings emerge. First, similar to results for non-financial firms, a productivity pecking order drives bank internationalization. Second, only a few non-financial firms engage in international trade, but many banks hold international assets, and only a few large banks engage in foreign direct investment. Third, in addition to productivity, risk factors matter for
367. The determinants of international flows of U.S. currency [1.469%]
Rebecca Hellerstein & William Ryan (2009)
Downloadable! This paper examines the determinants of cross-border flows of U.S. dollar banknotes, using a new panel data set of bilateral flows between the United States and 103 countries from 1990 to 2007. We show that a gravity model explains international flows of currency as well as it explains international flows of goods and financial assets. We find important roles for market size and transaction costs, consistent with the traditional gravity framework, as well as roles for financial depth, the behavior of the nominal exchange rate, the size of the informal sector, the amount of remittance credits, the degree of competition with the euro, and the history of macroeconomic instability over the previous generation. We find no role for official trade flows of goods. Our results thus confirm several hypotheses about the determinants of using a secondary currency.
368. Testing Mundell's Intuition of Endogenous OCA Theory [1.414%]
Thierry Warin & Phanindra V. Wunnava & Hubert P. Janicki (2009)
Downloadable (with restrictions)! This paper presents an empirical assessment of the endogenous optimum currency area theory. Frankel and Rose (1998 ) study the endogeneity of a currency union through the lens of international trade flows. Our study extends Frankel and Rose's model by using FDI flows to test the original theory developed by Mundell in 1973. A gravity model is used to empirically assess the effectiveness of the convergence criteria by examining location-specific advantages that guide multinational investment within the European Union. A fixed effects model based on a panel data of foreign direct investment (FDI) flows within the EU-15 shows that horizontal investment promotes the diffusion of the production process across the national border. Specifically, our results suggest that economic convergence ensured by belonging to the common currency area helps double FDI flows. Copyright � 2009 The Authors. Journal compilation � Blackwell Publishing Ltd 2009.
369. What drives international bank flows? Politics, institutions and other determinants [1.275%]
Papaioannou, Elias (2005)
Downloadable! This paper uses a large panel of bilateral bank flow data to assess how institutions and politics affect international capital -bank in particular- flows. The following key findings emerge: 1) The empirical "gravity" model is the benchmark in explaining the volume of international banking activities. 2) Conditioned on standard gravity factors (distance, GDP, population), well-functioning institutions are a key driving force for international bank flows. Specifically, foreign banks invest substantially more in countries with i) uncorrupt bureaucracies, ii) high-quality legal system, and iii) a non-government controlled banking system. 3) Beyond institutions, politics exert also a firstorder impact. 4) The European Integration process has spurred cross-border banking activities between member states. These results are robust to various econometric methodologies, samples and the potential endogeneity of institutional characteristics. The strong institutions/politics-bank flows nexus has str
370. Asia 2050: Realizing the Asian Century [1.144%]
(2011)
Downloadable! This book determines what Asia as a whole is capable of achieving by the year 2050, and the related policies and reforms that are required to reach its development potential. Asia is in the midst of a truly historic transformation. If it continues to grow on its recent trajectory, it could, by 2050, account for more than half of global GDP, trade and investment, and enjoy widespread affluence. Its per capita income could rise six-fold. It thus holds the promise of making some 4 billion Asians, hitherto commonly associated with poverty and deprivation, affluent by today’s standards. By nearly doubling its share of global GDP (from 27 percent in 2010 to 51 percent by 2050), Asia would regain the dominant global economic position it held some 250 years ago, before the Industrial Revolution. Some have called this possibility the “Asian Century”. This promising outcome, premised on the major economies sustaining the present growth trajectory, is plausible, but it does not imply that the path ah
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