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Trade Costs and Provincial Heterogeneity in Italy

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Author Info
Michele Fratianni (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
Francesco Marchionne (Universita Politecnica delle Marche,)

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Abstract

We test the hypothesis that higher economic development is associated with lower trade costs. Using different methods to control for multilateral resistance, we apply two alternative gravity equations (GE). In the first, we estimate total exports from 103 Italian provinces to 188 countries over the period 1995-2004. In the second, we estimate sectoral exports and then construct provincial trade cost elasticities. Italian provinces are heterogeneous with respect to trade costs. The two versions of GE are qualitatively the same but quantitatively different suggesting that other factors than trade costs are at play, possibly agglomeration externalities.

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Publisher Info
Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2008-03.

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Date of creation: Feb 2008
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Handle: RePEc:iuk:wpaper:2008-03

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Related research
Keywords: trade costs; heterogeneity; distance; gravity equation;

Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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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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  2. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 7-46, 04. [Downloadable!] (restricted)
  3. Richard Baldwin & Daria Taglioni, 2006. "Gravity for Dummies and Dummies for Gravity Equations," NBER Working Papers 12516, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Heejoon Kang & Michele Fratianni, 2006. "International Trade, OECD Membership, and Religion," Open Economies Review, Springer, vol. 17(4), pages 493-508, December. [Downloadable!] (restricted)
  5. Carrere, Celine, 2006. "Revisiting the effects of regional trade agreements on trade flows with proper specification of the gravity model," European Economic Review, Elsevier, vol. 50(2), pages 223-247, February. [Downloadable!] (restricted)
  6. Chen, Natalie, 2004. "Intra-national versus international trade in the European Union: why do national borders matter?," Journal of International Economics, Elsevier, vol. 63(1), pages 93-118, May. [Downloadable!] (restricted)
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  7. Keith Head & John Ries, 1998. "Immigration and Trade Creation: Econometric Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 47-62, February.
  8. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
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  9. Jon Haveman & David Hummels, 2004. "Alternative hypotheses and the volume of trade: the gravity equation and the extent of specialization," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 199-218, February. [Downloadable!] (restricted)
  10. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February. [Downloadable!] (restricted)
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  11. 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)
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