Heterogeneity in Trade Costs
2008, Economics Bulletin
Michele U. Fratianni, Francesco Marchionne
In this paper, we test the hypothesis that higher economic development is associated with lower trade costs. Using exports from 103 Italian provinces to 188 countries over the period 1995-2004, we estimate distance elasticity, our measure of trade costs, through a gravity equation model of bilateral trade derived by Anderson and van Wincoop (2003). We use different methods to control for multilateral resistance. Results corroborate our hypothesis. We find that heterogeneity of trade costs in Italian provinces is high and that it is negatively associated with economic development.
Michele Fratianni and Francesco Marchionne, "Heterogeneity of Trade Costs", Economics Bulletin, 2008, Vol.6, number 48:1-14.
trade costs, heterogeneity, distance, gravity equation.