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History, culture, and trade: a dynamic gravity approach

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  • Campbell, Douglas L.

Abstract

What determines trade patterns? Habit persistence in consumer tastes and learning-by-doing in production imply that history and culture are key determinants. 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, it is shown 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 University Library of Munich, Germany in its series MPRA Paper with number 24014.

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Date of creation: Jul 2010
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Handle: RePEc:pra:mprapa:24014

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

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Citations

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Cited by:
  1. Douglas L. Campbell, 2013. "Relative Prices, Hysteresis, and the Decline of American Manufacturing," 2013 Papers pca584, Job Market Papers.
  2. Moelders, Florian, 2011. "Trade Persistence and the Limits of Trade Agreements," Proceedings of the German Development Economics Conference, Berlin 2011 58, Verein für Socialpolitik, Research Committee Development Economics.
  3. 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 2012-6, CREATE.
  4. María Pía Olivero & Yoto V. Yotov, 2012. "Dynamic gravity: endogenous country size and asset accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 64-92, February.
  5. Campbell, Douglas L., 2011. "Estimating the impact of currency unions on trade using a dynamic gravity framework," MPRA Paper 35531, University Library of Munich, Germany.
  6. 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 11/230, International Monetary Fund.
  7. Tamini, Lota Dabio & Doyon, Maurice & Simon, Rodrigue, 2012. "Analyzing Trade Liberalization Effect in the Egg Sector Using a Dynamic Gravity Model," Working Papers 125286, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
  8. 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.
  9. Douglas L. Campbell, 2013. "Estimating the Impact of Currency Unions on Trade: Solving the Glick and Rose Puzzle," The World Economy, Wiley Blackwell, vol. 36(10), pages 1278-1293, October.

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