Working Paper: NBER ID: w16301
Authors: James E. Anderson; Yoto V. Yotov
Abstract: 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.
Keywords: specialization; trade costs; total factor productivity; structural gravity model
JEL Codes: F10; F15; R10; R40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| specialization (Z00) | constructed home bias (CHB) (G59) |
| specialization (Z00) | total factor productivity (TFP) (D24) |
| constructed home bias (CHB) (G59) | total factor productivity (TFP) (D24) |
| specialization (Z00) | trade costs (F19) |
| trade costs (F19) | total factor productivity (TFP) (D24) |