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History, Culture, and Trade: A Dynamic Gravity Approach

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  • Douglas L. Campbell

Abstract

What determines trade patterns? Habit persistence in consumer tastes and learning-by-doing in production imply that history and culture matter. Deriving a dynamic gravity equation from a simple model, it is shown that cultural similarity is a product of history, so that trade patterns are a function of bilateral GDP, current trade costs, and the past history of trade costs. Using a trade data set which spans from 1870 to 2000, I demonstrate that many gravity variables operate via lagged trade, that historical trade shocks matter, and that trade patterns are persistent, even across centuries.

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Paper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2010_26.

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Date of creation: 26 Aug 2010
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Handle: RePEc:eei:rpaper:eeri_rp_2010_26

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Keywords: Dynamic Gravity Equation; Endogenous Preferences; Habit Persistence; Learning By-Doing.;

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Cited by:
  1. Tamini, Lota D. & Doyon, Maurice & Simon, Rodrigue, 2012. "Analyzing trade liberalization effect in egg sector using a dynamic gravity model," MPRA Paper 39315, University Library of Munich, Germany.
  2. Douglas L. Campbell, 2013. "Estimating the Impact of Currency Unions on Trade: Solving the Glick and Rose Puzzle," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 36(10), pages 1278-1293, October.
  3. Huigang Chen & Alin Mirestean & Charalambos G. Tsangarides, 2011. "Limited Information Bayesian Model Averaging for Dynamic Panels with An Application to a Trade Gravity Model," IMF Working Papers, International Monetary Fund 11/230, International Monetary Fund.
  4. Campbell, Douglas L., 2012. "Estimating the Impact of Currency Unions on Trade Using a Dynamic Gravity Framework," MPRA Paper 37091, University Library of Munich, Germany.
  5. Tamini, Lota Dabio & Doyon, Maurice & Simon, Rodrigue, 2012. "Analyzing Trade Liberalization Effect in the Egg Sector Using a Dynamic Gravity Model," Working Papers, 125286, .
  6. Douglas L. Campbell, 2013. "Relative Prices, Hysteresis, and the Decline of American Manufacturing," 2013 Papers, Job Market Papers pca584, Job Market Papers.
  7. Lota D. Tamini & Maurice Doyon & Rodrigue Simon, 2012. "Analyzing Trade Liberalization Effect in the Egg Sector Using a Dynamic Gravity Model," Cahiers de recherche CREATE, CREATE 2012-6, CREATE.
  8. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 45(1), pages 64-92, February.
  9. Moelders, Florian, 2011. "Trade Persistence and the Limits of Trade Agreements," Proceedings of the German Development Economics Conference, Berlin 2011, Verein für Socialpolitik, Research Committee Development Economics 58, Verein für Socialpolitik, Research Committee Development Economics.

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