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A Spatial Theory of Trade

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Author Info
Esteban Rossi-Hansberg

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Abstract

The equilibrium relationship between trade and the spatial distribution of economic activity is fundamental to the analysis of national and regional trade patterns, as well as to the effect of trade frictions. We study this relationship using a trade model with a continuum of regions, transport costs, and agglomeration effects caused by production externalities. We analyze the equilibrium specialization and trade patterns for different levels of transport costs and externality parameters. Understanding trade via the distribution of economic activity in space naturally rationalizes the evidence on border effects and the "gravity equation."

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File URL: http://hdl.handle.net/10.1257/000282805775014371
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File URL: http://www.aeaweb.org/articles/article_detail.php?journal=AER&volume=95&issue=5&article=7&issue_date=December2005
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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 95 (2005)
Issue (Month): 5 (December)
Pages: 1464-1491
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Handle: RePEc:aea:aecrev:v:95:y:2005:i:5:p:1464-1491

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-25, December. [Downloadable!] (restricted)
    Other versions:
  3. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Diego Puga, 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEP Discussion Papers dp0279, Centre for Economic Performance, LSE. [Downloadable!]
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  5. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
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  6. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February. [Downloadable!] (restricted)
  7. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June. [Downloadable!] (restricted)
  8. Karl Aiginger & Stephen W. Davies, 2004. "Industrial specialisation and geographic concentration: Two sides of the same coin? Not for the European Union," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 231-248, November. [Downloadable!]
  9. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March. [Downloadable!]
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  10. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March. [Downloadable!]
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  11. Davis, Donald R. & Weinstein, David E., 2003. "Market access, economic geography and comparative advantage: an empirical test," Journal of International Economics, Elsevier, vol. 59(1), pages 1-23, January. [Downloadable!] (restricted)
  12. Kei-Mu Yi, 2005. "Vertical specialization and the border effect puzzle," Working Papers 05-24, Federal Reserve Bank of Philadelphia. [Downloadable!]
  13. Paul Krugman & Anthony J. Venables, 1995. "The Seamless World: A Spatial Model of International Specialization," NBER Working Papers 5220, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September. [Downloadable!]
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  15. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July. [Downloadable!] (restricted)
  16. Fujita, Masahisa & Thisse, Jacques-François, 1996. "Economics of Agglomeration," CEPR Discussion Papers 1344, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  17. Puga, Diego & Venables, Anthony J., 1997. "Preferential trading arrangements and industrial location," Journal of International Economics, Elsevier, vol. 43(3-4), pages 347-368, November. [Downloadable!] (restricted)
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  18. repec:att:wimass:199713 is not listed on IDEAS
  19. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August. [Downloadable!] (restricted)
  20. Peter Egger, . "A Note on the Proper Econometric Specification of the Gravity Equation," WIFO Working Papers 108, WIFO. [Downloadable!]
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  21. Jonathan Eaton & Samuel Kortum, 2001. "Trade in Capital Goods," NBER Working Papers 8070, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Carsten Herrmann-Pillath, 2006. "The true story of wine and cloth, or: building blocks of an evolutionary political economy of international trade," Journal of Evolutionary Economics, Springer, vol. 16(4), pages 383-417, October. [Downloadable!] (restricted)
  2. Yilmazkuday, Hakan, 2009. "How Important is Technology? A Counterfactual Analysis," MPRA Paper 16838, University Library of Munich, Germany. [Downloadable!]
  3. Heinemeyer, Hans Christian & Schulze, Max Stephan & Wolf, Nikolaus, 2008. "Endogenous Borders? Exploring a Natural Experiment on Border Effects," CEPR Discussion Papers 6909, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Klaus Desmet & Esteban Rossi-Hansberg, 2007. "Spatial Growth and Industry Age," NBER Working Papers 13302, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Karl Aiginger & Stephen W. Davies, 2004. "Industrial specialisation and geographic concentration: Two sides of the same coin? Not for the European Union," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 231-248, November. [Downloadable!]
  6. Buys, Piet & Deichmann, Uwe & Wheeler, David, 2006. "Road network upgrading and overland trade expansion in Sub-Saharan Africa," Policy Research Working Paper Series 4097, The World Bank. [Downloadable!]
  7. Nikolaus Wolf, 2008. "Was Germany ever United? Evidence from Intra- and International Trade 1885 - 1933," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  8. Klaus Desmet & Esteban Rossi-Hansberg, 2009. "Spatial Development," NBER Working Papers 15349, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Stephen Redding, 2009. "Economic Geography: A Review of the Theoretical and Empirical Literature," CEP Discussion Papers dp0904, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  10. Kieron Meagher & Andrew Wait, 2008. "Who Decides about Change and Restructuring in Organizations?," CEPR Discussion Papers 587, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
  11. Nicole Höhenberger & Claudia Schmiedeberg, 2008. "Structural Convergence of European Countries," cege – Center for European, Governance and Economic Development Research Discussion Papers 75, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany)., revised 28 Jul 2008. [Downloadable!]
  12. Kei-Mu Yi, 2005. "Vertical specialization and the border effect puzzle," Working Papers 05-24, Federal Reserve Bank of Philadelphia. [Downloadable!]
  13. Anastasios Xepapadeas & Efthymia Kyriakopoulou, 2009. "Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations," Working Papers 2009.70, Fondazione Eni Enrico Mattei. [Downloadable!]
  14. Zuoquan Zhao, 2006. "A Spatial Model of Growth: Taking Technology Seriously," Papers on Entrepreneurship, Growth and Public Policy 2006-12, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group. [Downloadable!]
  15. Karl Aiginger & Esteban Rossi-Hansberg, 2006. "Specialization and concentration: a note on theory and evidence," Empirica, Springer, vol. 33(4), pages 255-266, September. [Downloadable!] (restricted)
  16. Heejoon Kang & Michele Fratianni, 2006. "International Trade Efficiency, the Gravity Equation, and the Stochastic Frontier," Working Papers 2006-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  17. Hans-Christian Heinemeyer & Max-Stephan Schulze & Nikolaus Wolf, 2008. "Endogenous Borders? The Effects of New Borders on Trade in Central Europe 1885-1933," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  18. Hartmut Egger & Peter Egger, 2008. "The Trade and Welfare Effects of Mergers in Space," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  19. Kei-Mu Yi, 2008. "Can multi-stage production explain the home bias in trade?," Working Papers 08-12, Federal Reserve Bank of Philadelphia. [Downloadable!]
  20. Yilmazkuday, Hakan, 2009. "Distribution of Consumption, Production and Trade within the U.S," MPRA Paper 16361, University Library of Munich, Germany. [Downloadable!]
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