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International Trade, OECD Membership, and Religion

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  • Heejoon Kang

    ()

  • Michele Fratianni

    ()

Abstract

Transaction costs in trade gravity equation are proxied by the distance that separates two trading partners, under the assumption that the distance elasticity is the same across all trading partners. We show that distance elasticity, however, critically depends on whether trading partners are industrial countries (i.e., members of the OECD) or share same religion. These heterogeneities are both statistically and economically significant. For instance, expected trade flows are the largest when an OECD member trades with a non-member and both are non-religious. Expected trade flows fall as much as by 62.9% between two non-religious, non-OECD members. Expected bilateral trade drops by 48.1% when both countries in the pair are OECD members while one is Christian and the other is Islamic. Both religion and OECD membership significantly affect the typical transaction costs implied by the gravity equation. Copyright Springer Science + Business Media, LLC 2006

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File URL: http://hdl.handle.net/10.1007/s11079-006-0361-y
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 17 (2006)
Issue (Month): 4 (December)
Pages: 493-508

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Handle: RePEc:kap:openec:v:17:y:2006:i:4:p:493-508

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: gravity equation; OECD membership; religion; trade flows; transaction costs;

References

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  1. Rose, Andrew K, 2003. "Which International Institutions Promote International Trade?," CEPR Discussion Papers 3764, C.E.P.R. Discussion Papers.
  2. Fratianni, Michele & Kang, Heejoon, 2006. "Heterogeneous distance-elasticities in trade gravity models," Economics Letters, Elsevier, vol. 90(1), pages 68-71, January.
  3. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 7-46, 04.
  4. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc.
  5. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
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Cited by:
  1. repec:ebl:ecbull:v:6:y:2008:i:48:p:1-14 is not listed on IDEAS
  2. Campbell, Douglas L., 2010. "History, culture, and trade: a dynamic gravity approach," MPRA Paper 24014, University Library of Munich, Germany.
  3. Michele Fratianni & Francesco Marchionne, 2008. "Trade Costs and Provincial Heterogeneity in Italy," Working Papers 2008-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  4. Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Clark University, vol. 88(2), pages 137-163, 04.
  5. Michele Fratianni & Francesco Marchionne, 2009. "The Limits to Integration," Mo.Fi.R. Working Papers 20, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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