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Product Heterogeneity, Intangible Barriers and Distance Decay: The Effect of Multiple Dimensions of Distance on Trade across Different Product Categories

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Author Info

  • Maureen B.M. Lankhuizen

    ()
    (VU University Amsterdam)

  • Thomas de Graaff

    ()
    (VU University Amsterdam)

  • Henri L.F. de Groot

    ()
    (VU University Amsterdam, and Ecorys NEI)

Abstract

We empirically examine the heterogeneity in the effects of multiple dimensions of distance on trade across detailed product groups. Using finite mixture modeling on bilateral trade data at the 3-digit SITC level, we endogenously group product categories into an, a priori unknown, number of segments based on estimated coefficients of multiple dimensions of distance in the gravity equation. We find that institutional distance, whether countries belong to the same trade block and especially geographical distance are crucial and distinct factors to classify commodities in homogeneous groups.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 12-065/3.

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Date of creation: 09 Jul 2012
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Handle: RePEc:dgr:uvatin:20120065

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Web page: http://www.tinbergen.nl

Related research

Keywords: bilateral trade; gravity models; distance; institutions; product heterogeneity; finite mixture modeling;

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References

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  1. Gert-Jan M. Linders & Henri L.F. de Groot, 2006. "Estimation of the Gravity Equation in the Presence of Zero Flows," Tinbergen Institute Discussion Papers, Tinbergen Institute 06-072/3, Tinbergen Institute.
  2. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, Elsevier, vol. 48(1), pages 7-35, June.
  3. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
  4. Bram van Dijk & Philip Hans Franses & Richard Paap & Dick van Dijk, 2011. "Modelling regional house prices," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 43(17), pages 2097-2110.
  5. Gert-Jan M. Linders & Arjen Slangen & Henri L.F. de Groot & Sjoerd Beugelsdijk, 2005. "Cultural and Institutional Determinants of Bilateral Trade Flows," Tinbergen Institute Discussion Papers, Tinbergen Institute 05-074/3, Tinbergen Institute.
  6. Thomas de Graaff & Jaap Boter & Jan Rouwendal, 2009. "On spatial differences in the attractiveness of Dutch museums," Environment and Planning A, Pion Ltd, London, vol. 41(11), pages 2778-2797, November.
  7. Henri L.F. De Groot & Gert-Jan Linders & Piet Rietveld & Uma Subramanian, 2003. "The Institutional Determinants of Bilateral Trade Patterns," ERSA conference papers ersa03p421, European Regional Science Association.
  8. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "Cultural Biases in Economic Exchange?," Economics Working Papers, European University Institute ECO2007/42, European University Institute.
  9. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
  10. Maureen Lankhuizen & Henri L.F. de Groot & Gert-Jan M. Linders, 2009. "The Trade-Off between Foreign Direct Investments and Exports: The Role of Multiple Dimensions of Distance," Tinbergen Institute Discussion Papers, Tinbergen Institute 09-050/3, Tinbergen Institute.
  11. Jan M�hlmann & Sjef Ederveen & Henri L.F. de Groot & Gert-Jan M. Linders, 2009. "Intangible Barriers to International Trade: A Sectoral Approach," Tinbergen Institute Discussion Papers, Tinbergen Institute 09-021/3, Tinbergen Institute.
  12. Jeroen Hinloopen & Charles van Marrewijk, 2012. "Power laws and comparative advantage," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 44(12), pages 1483-1507, April.
  13. Philip McCann, 2007. "Globalization and economic geography: the world is curved, not flat," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, Cambridge Political Economy Society, vol. 1(3), pages 351-370.
  14. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 39(4), pages 1177-1203, December.
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Cited by:
  1. Ceren Ozgen & Thomas de Graff, 2013. "Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data," Norface Discussion Paper Series, Norface Research Programme on Migration, Department of Economics, University College London 2013012, Norface Research Programme on Migration, Department of Economics, University College London.

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