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How important is the new goods margin in international trade?

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  • Timothy J. Kehoe
  • Kim J. Ruhl

Abstract

We propose a methodology for studying changes in bilateral trade due to countries exporting goods that they did not export previously or exported only in small quantities. Applying this methodology to country pairs that undergo trade liberalization and to pairs in which one of the countries undergoes significant structural transformation, we find large increases on this extensive—or new goods—margin. Looking at country pairs with no major trade policy change or structural change, however, we find little or no increases on the extensive margin. Studying time series on trade by commodity, we find that data from before 1988 and 1989, when most major trading countries moved to the Harmonized System, are not compatible with data from afterward.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 324.

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Date of creation: 2009
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Handle: RePEc:fip:fedmsr:324

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Keywords: International trade ; Free trade;

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  1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development.
  2. Timothy J. Kehoe, 2003. "An Evaluation of the Performance of Applied General Equilibrium Models of the Impact of NAFTA," Levine's Working Paper Archive 506439000000000525, David K. Levine.
  3. Kraay, Aart & Ventura, Jaume, 2002. "Trade integration and risk sharing," European Economic Review, Elsevier, vol. 46(6), pages 1023-1048, June.
  4. Grubel, Herbert G & Lloyd, P J, 1971. "The Empirical Measurement of Intra- Industry Trade," The Economic Record, The Economic Society of Australia, vol. 47(120), pages 494-517, December.
  5. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "A Decade Lost and Found: Mexico and Chile in the 1980s," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 166-205, January.
  6. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-39, December.
  7. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
  8. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2002. "Decades lost and found: Mexico and Chile since 1980," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 3-30.
  9. Horag Choi & George Alessandria, 2004. "Export Decisions and International Business Cycles," Econometric Society 2004 North American Summer Meetings 570, Econometric Society.
  10. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
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