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Exploring the Intensive and Extensive Margins of World Trade

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Author Info
Gabriel J. Felbermayr ()
Wilhelm Kohler ()

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Abstract

World trade evolves at two margins. Where a bilateral trading relationship already exists it may increase through time (intensive margin). But trade may also increase if a trading bilateral relationship is newly established between countries that have not traded with each other in the past (extensive margin). We provide an empirical dissection of post-World-War-II growth in manufacturing world trade along these two margins. We propose a “corner-solutions-version” of the gravity model to explain movements on both margins. A Tobit estimation of this model resolves the so-called “distance-puzzle”. It also finds more convincing evidence than recent literature that WTO-membership enhances trade.

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File URL: http://www.cesifo-group.de/DocCIDL/cesifo1_wp1276.pdf
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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1276.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1276

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Related research
Keywords: bilateral trade; globalization; gravity model;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F15 - International Economics - - Trade - - - Economic Integration

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. Barry Eichengreen & Douglas A. Irwin, 1998. "The Role of History in Bilateral Trade Flows," NBER Chapters, in: The Regionalization of the World Economy, pages 33-62 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April. [Downloadable!] (restricted)
    Other versions:
  4. Arvind Subramanian & Shang-Jin Wei, 2003. "The WTO Promotes Trade, Strongly But Unevenly," NBER Working Papers 10024, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Peter Egger & Michael Pfaffermayr, 2001. "Distance, Trade and FDI: A Hausman-Taylor SUR Approach," WIFO Working Papers 164, WIFO. [Downloadable!]
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  6. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March. [Downloadable!]
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  7. Markusen, James R., 2002. "Multinational Firms and the Theory of International Trade," MPRA Paper 8380, University Library of Munich, Germany. [Downloadable!]
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  8. Romain Wacziarg & Karen Horn Welch, 2003. "Trade Liberalization and Growth: New Evidence," NBER Working Papers 10152, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Alan V Deardorff, 2004. "Local Comparative Advantage: Trade Costs and the Pattern of Trade," Working Papers 500, Research Seminar in International Economics, University of Michigan. [Downloadable!]
  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. Douglas A. Irwin & Marko Tervio, 2000. "Does Trade Raise Income? Evidence from the Twentieth Century," NBER Working Papers 7745, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May. [Downloadable!] (restricted)
  13. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  14. Choi, E Kwan & Harrigan, James, 2004. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  15. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier. [Downloadable!] (restricted)
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  16. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December. [Downloadable!] (restricted)
  17. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February. [Downloadable!] (restricted)
  18. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Falling Trade Costs, Heterogeneous Firms, and Industry Dynamics," NBER Working Papers 9639, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Rikhil Bhavnani & David T. Coe & Arvind Subramanian & Natalia T. Tamirisa, 2002. "The Missing Globalization Puzzle," IMF Working Papers 02/171, International Monetary Fund. [Downloadable!]
  20. repec:rus:hseeco:123558 is not listed on IDEAS
  21. J. M. C. Santos Silva & Silvana Tenreyro, 2003. "Gravity-defying trade," Working Papers 03-1, Federal Reserve Bank of Boston. [Downloadable!]
  22. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc. [Downloadable!]
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  23. Brun, Jean-François & Carrère, Céline & de Melo, Jaime & Guillaumont, Patrick, 2002. "Has Distance Died? Evidence from a Panel Gravity Model," CEPR Discussion Papers 3500, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  24. Buch, Claudia M. & Kleinert, Jorn & Toubal, Farid, 2004. "The distance puzzle: on the interpretation of the distance coefficient in gravity equations," Economics Letters, Elsevier, vol. 83(3), pages 293-298, June. [Downloadable!] (restricted)
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  25. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
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. Ana Cristina Molina and Marco Fugazza, 2009. "The determinants of trade survival," HEI Working Papers 05-2009, Economics Section, The Graduate Institute of International Studies, revised Jun 2009. [Downloadable!]
  2. Iacovone, Leonardo & Javorcik, Beata S., 2008. "Multi-product exporters : diversification and micro-level dynamics," Policy Research Working Paper Series 4723, The World Bank. [Downloadable!]
  3. Francois, Joseph & Manchin, Miriam, 2007. "Institutions, infrastructure, and trade," Policy Research Working Paper Series 4152, The World Bank. [Downloadable!]
    Other versions:
  4. Cong S. Pham & Mary E. Lovely & Devashish Mitra, 2009. "The Home-Market Effect and Bilateral Trade Patterns: A Reexamination of the Evidence," Economics Series 2009_12, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
  5. Gabriel J. Felbermayr & Wilhelm Kohler, 2007. "Does WTO Membership Make a Difference at the Extensive Margin of World Trade?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Kristian Behrens & Cem Ertur & Wilfried Koch, 2007. "Dual' gravity: Using spatial econometrics to control for multilateral resistance," CIRJE F-Series CIRJE-F-501, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
    Other versions:
  7. Richard Baldwin Virginia Di Nino, 2006. "Euros and zeros: The common currency effect on trade in new goods," HEI Working Papers heiwp21-2006, Economics Section, The Graduate Institute of International Studies, revised 31 Oct 2006. [Downloadable!]
    Other versions:
  8. Wilhelm Kohler & Gabriel Felbermayr, . "WTO Membership and the Extensive Margin of World Trade: New Evidence," Discussion Papers 09/06, University of Nottingham, GEP. [Downloadable!]
  9. Theo S. Eicher & Christian Henn, 2008. "In Search of WTO Trade Effects: Preferential Trade Agreements Promote Trade Strongly, But Unevenly," Working Papers UWEC-2008-22, University of Washington, Department of Economics. [Downloadable!]
  10. Agostino, Maria Rosaria & Aiello, Francesco & Cardamone, Paola, 2007. "Analyzing the Impact of Trade Preferences in Gravity Models. Does Aggregation Matter?," Working Papers 7294, TRADEAG - Agricultural Trade Agreements. [Downloadable!]
  11. Boriss Siliverstovs & Dieter Schumacher, 2008. "Disaggregated Trade Flows and the “Missing Globalization Puzzle”," Working papers 08-209, KOF Swiss Economic Institute, ETH Zurich. [Downloadable!]
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  12. Persson, Maria, 2008. "Trade Facilitation and the Extensive and Intensive Margins of Trade," Working Papers 2008:13, Lund University, Department of Economics. [Downloadable!]
  13. Gabriel J Felbermayr & Wilhelm Kohler, 2009. "WTO Membership and the Extensive Margin of World Trade: New Evidence," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 304/2009, Department of Economics, University of Hohenheim, Germany. [Downloadable!]
  14. Sergio de Nardis & Carmine Pappalardo & Claudio Vicarelli, 2008. "The Euro adoption’s impact on extensive and intensive margins of trade: the Italian case," ISAE Working Papers 101, ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY). [Downloadable!]
  15. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007. "Estimating Trade Flows: Trading Partners and Trading Volumes," NBER Working Papers 12927, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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