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International Trade Integration: A Disaggregated Approach

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Author Info
Natalie Chen ()
Dennis Novy ()

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Abstract

This paper investigates the sources and size of trade barriers at the industry level. We derive a micro-founded measure of industry-specific bilateral trade integration that has an in-built control for time-varying multilateral resistance. This trade integration measure is consistent with a broad range of recent trade models including the Anderson and van Wincoop (2003) framework, the Ricardian model by Eaton and Kortum (2002) and heterogeneous firms models. We use it to explore trade barriers for manufacturing industries in European Union countries between 1999 and 2003. We find a large degree of trade cost heterogeneity across industries. The most important trade barriers are transportation costs and policy factors such as Technical Barriers to Trade. Trade integration is generally lower for countries that opted out of the Euro or did not abolish border controls in accordance with the Schengen Agreement. Reductions in trade barriers explain about one-half of the growth in trade over the period 1999-2003 and are therefore a major driving force of the EU Single Market.

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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. 2595.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2595

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Related research
Keywords: trade integration; gravity; trade costs; multilateral resistance; industries; disaggregation; European Union;

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
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.:

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    Other versions:
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  16. Berthelon, Matias & Freund, Caroline, 2008. "On the conservation of distance in international trade," Journal of International Economics, Elsevier, vol. 75(2), pages 310-320, July. [Downloadable!] (restricted)
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  19. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains from Variety," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 541-585, May. [Downloadable!] (restricted)
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  20. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669 Elsevier. [Downloadable!] (restricted)
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  21. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05. [Downloadable!] (restricted)
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  22. Novy, Dennis, 2008. "Gravity Redux : Measuring International Trade Costs with Panel Data," The Warwick Economics Research Paper Series (TWERPS) 861, University of Warwick, Department of Economics. [Downloadable!]
  23. 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)
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  26. Will Martin & Cong S. Pham, 2008. "Estimating the Gravity Model When Zero Trade Flows are Frequent," Economics Series 2008_03, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance. [Downloadable!]
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  29. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June. [Downloadable!]
  30. Carolyn L. Evans & James Harrigan, 2005. "Distance, Time, and Specialization: Lean Retailing in General Equilibrium," American Economic Review, American Economic Association, vol. 95(1), pages 292-313, March. [Downloadable!]
  31. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, 09. [Downloadable!] (restricted)
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  32. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, 09. [Downloadable!] (restricted)
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  33. Harrigan, James, 1996. "Openness to trade in manufactures in the OECD," Journal of International Economics, Elsevier, vol. 40(1-2), pages 23-39, February. [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. Costas Arkolakis, 2009. "A Unified Theory of Firm Selection and Growth," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Novy, Dennis, 2008. "Gravity Redux : Measuring International Trade Costs with Panel Data," The Warwick Economics Research Paper Series (TWERPS) 861, University of Warwick, Department of Economics. [Downloadable!]
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