Agglomeration Matters for Trade
AbstractWe use a unique administrative dataset of Spanish exporters to document the existence of exporters' geographical agglomeration by export-destination. We reveal that firms selling to countries with worse business regulations, dissimilar language and different currency tend to cluster signicantly more. We then assess the implications of exporters' geographical agglomeration for firms' behaviour and for the estimated welfare gains from trade. On the one hand, we find that exporters engage in more stable trade relationships with those countries that are the export-destinations of nearby firms. On the other, we introduce agglomeration in a model of international trade a la Melitz (2003). Using our Spanish firm-level data, we find that relative to a model without agglomeration, accounting for this phenomenon increases by 44% the elasticity of welfare with respect to fixed trade-costs.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 85.
Date of creation: 2013
Date of revision:
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Other versions of this item:
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-23 (All new papers)
- NEP-BEC-2013-08-23 (Business Economics)
- NEP-GEO-2013-08-23 (Economic Geography)
- NEP-INT-2013-08-23 (International Trade)
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