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A note on trade costs and distance

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Download whelank_workpap_007.pdf152.75 KB
Author(s)
Whelan, Karl 
Lawless, Martina 
Uri
http://hdl.handle.net/10197/224
Date Issued
October 2007
Date Available
11T15:42:04Z June 2008
Abstract
One of the most famous and robust findings in international economics is that distance has a strong negative effect on trade. Bernard, Jensen, Redding, and Schott (2007) discuss how this can be decomposed into an effect due to the number of products and an effect due to average exports per product. Using US firm-level data, they show that distance has a strong negative effect on the number of products exported. However, they find that the intensive margin—average sales of individual products—is increasing with distance. We show that this apparently puzzling finding is consistent with models featuring firm heterogeneity in productivity and fixed costs associated with exporting to each market. We also show how evidence of this type can be used to derive new estimates of how distance affects fixed and variable trade costs and how these two costs combine to generate the distance effect on trade.
Type of Material
Technical Report
Publisher
Central Bank of Ireland
Series
Central Bank of Ireland Research Technical Paper
7/RT/07
Copyright (Published Version)
2007 Copyright Central Bank of Ireland
Subject – LCSH
Transportation--Costs
International trade--Costs
Web versions
http://www.centralbank.ie/data/TechPaperFiles/7RT07.pdf
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
https://creativecommons.org/licenses/by-nc-sa/1.0/
Owning collection
Economics Research Collection
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