Working Paper: NBER ID: w14423
Authors: James E. Anderson; Yoto V. Yotov
Abstract: 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.
Keywords: Bilateral Trade Costs; Structural Gravity Model; Economic Geography; Canada
JEL Codes: F10; F15; R10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade costs (F19) | sellers' incidence (H22) |
| trade costs (F19) | buyers' incidence (H22) |
| sellers' incidence (H22) | home bias (F23) |
| buyers' incidence (H22) | home bias (F23) |
| changes in incidence (H22) | home bias (F23) |
| fall in outward multilateral resistance (F29) | factory gate prices (L11) |
| factory gate prices (L11) | total factor productivity (TFP) (D24) |
| factory gate prices (L11) | real GDP (E20) |
| Agreement on Internal Trade (AIT) (F15) | trade costs (F19) |