Gravity, trade integration, and heterogeneity across industries

We derive a micro-founded measure of bilateral trade integration that is consistent with a broad range of leading gravity models. This measure accounts for cross-industry heterogeneity by incorporating substitution elasticities estimated at the industry level. We then use it to provide a theory-based ranking of trade integration across manufacturing industries in European Union countries. In addition, we explore the determinants of trade integration, finding that substantial Technical Barriers to Trade in certain industries as well as high transportation costs associated with heavy-weight goods are the most notable trade barriers.

[1]  A. Rose,et al.  One money, one market : the effect of common currencies on trade , 2000 .

[2]  J. Harrigan.  Airplanes and Comparative Advantage , 2005 .

[3]  A. Levchenko,et al.  Power Laws in Firm Size and Openness to Trade: Measurement and Implications , 2010, SSRN Electronic Journal.

[4]  T. Mayer,et al.  The Empirics of Agglomeration and Trade , 2003 .

[5]  J. Hobbs.  Technical Barriers to Trade , 2007 .

[6]  Carolyn L. Evans.  The Economic Significance of National Border Effects , 2003 .

[7]  Volker Nitsch.  National borders and international trade: evidence from the European Union , 2000 .

[8]  Thomas Chaney,et al.  Distorted Gravity: The Intensive and Extensive Margins of International Trade , 2008 .

[9]  T. Mayer,et al.  Non-Europe: The magnitude and causes of market fragmentation in the EU , 2000 .

[10]  D. Greenaway,et al.  Exporting, productivity and agglomeration , 2008 .

[11]  Jeffrey A. Frankel,et al.  The Regionalization Of The World Economy , 1997 .

[12]  M. Pesaran.  Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure , 2004, SSRN Electronic Journal.

[13]  J. Harrigan.  OECD imports and trade barriers in 1983 , 1993 .

[14]  A. Venables,et al.  Infrastructure, Geographical Disadvantage, and Transport Costs , 1999 .

[15]  S. Davies,et al.  Industrial Organization in the European Union: Structure, Strategy, and the Competitive Mechanism , 1996 .

[16]  John Mccallum,et al.  National Borders Matter: Canada-U.S. Regional Trade Patterns , 1995 .

[17]  David Hummels.  Transportation Costs and International Trade in the Second Era of Globalization , 2007 .

[18]  James E. Rauch,et al.  Networks Versus Markets in International Trade , 1996 .

[19]  J. Bergstrand.  The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade , 1989 .

[20]  Alessandro Nicita,et al.  Estimating Trade Restrictiveness Indices , 2006 .

[21]  J. Harrigan,et al.  Distance, time, and specialization : Lean retailing in general equilibrium , 2005 .

[22]  S. Brakman,et al.  The monopolistic competition revolution in retrospect , 2001 .

[23]  Lorenzo Caliendo,et al.  Estimates of the Trade and Welfare Effects of NAFTA , 2011 .

[24]  Richard E. Baldwin,et al.  Regulatory Protectionism, Developing Nations, and a Two-Tier World Trade System , 2000 .

[25]  James E. Anderson.  A Theoretical Foundation for the Gravity Equation , 1979 .

[26]  J. Harrigan,et al.  Openness to trade in manufactures in the OECD , 1996 .

[27]  James E. Anderson,et al.  Trade Costs , 2004 .

[28]  James E. Rauch.  Business and Social Networks in International Trade , 2001 .

[29]  EORG S CHAUR,et al.  Time as a Trade Barrier , 2013 .

[30]  David Hummels,et al.  Toward a Geography of Trade Costs , 1999, GTAP Working Paper.

[31]  P. Combes,et al.  Transport costs: measures, determinants, and regional policy implications for France , 2005 .

[32]  G. Ottaviano,et al.  Market Size, Trade, and Productivity , 2005, World Scientific Studies in International Economics.

[33]  Peter K. Schott,et al.  Trade costs, firms and productivity , 2006 .

[34]  David E. Weinstein,et al.  Globalization and the Gains from Variety , 2004 .

[35]  Silvana Tenreyro,et al.  The Log of Gravity , 2004, The Review of Economics and Statistics.

[36]  James E. Anderson,et al.  Gravity with Gravitas: A Solution to the Border Puzzle , 2001 .

[37]  M. Crozet,et al.  Structural Gravity Equations with Intensive and Extensive Margins , 2010 .

[38]  R. Baldwin,et al.  The Euro's Trade Effects , 2006, SSRN Electronic Journal.

[39]  Gary S. Fields.  Accounting for Income Inequality and its Change: A New Method, With Application to the Distribution of Earnings in the United States , 2012 .

[40]  D. Novy.  Gravity Redux: Measuring International Trade Costs with Panel Data , 2011, SSRN Electronic Journal.

[41]  J. Bergstrand.  The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade , 1990 .

[42]  Daria Taglioni,et al.  Gravity for Dummies and Dummies for Gravity Equations , 2006 .

[43]  A. Venables,et al.  Infrastructure, Geographical Disadvantage, Transport Costs, and Trade , 2001 .

[44]  A. Rose.  One Money, One Market: Estimating the Effect of Common Currencies on Trade , 1999 .

[45]  Eric van Wincoop,et al.  Borders, Trade, and Welfare , 2001 .

[46]  K. Head,et al.  Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of US-C , 2001 .

[47]  Jonathan Eaton,et al.  Technology, Geography, and Trade , 2002 .

[48]  J. A. Dunlevy.  The Influence of Corruption and Language on the Protrade Effect of Immigrants: Evidence from the American States , 2006, Review of Economics and Statistics.

[49]  J. Stock,et al.  Instrumental Variables Regression with Weak Instruments , 1994 .

[50]  R. Feenstra.  New Product Varieties and the Measurement of International Prices , 1994 .

[51]  P. Krugman.  Scale Economies, Product Differentiation, and the Pattern of Trade , 1980 .

[52]  S. Wei.  Intra-National Versus International Trade: How Stubborn are Nations in Global Integration? , 1996 .

[53]  R. Forslid,et al.  The Core Periphery Model : Key Features and Effects , 2004 .

[54]  Natalie Chen,et al.  Intra-National Versus International Trade in the European Union: Why Do National Borders Matter? , 2002 .

[55]  E. Helpman,et al.  ESTIMATING TRADE FLOWS : TRADING PARTNERS AND TRADING VOLUMES Elhanan Helpman , 2007 .