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Trade Costs and Economic Development

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  • Michele Fratianni
  • Francesco Marchionne

Abstract

In our study, we tested the hypothesis of the bidirectional causality between trade costs and economic development using data on Italian provinces. Using different methods to control for multilateral resistance, we applied a gravity equation to estimate sectoral exports to 188 countries over the period 1995–2004. Provincial trade costs were constructed as the sum of five province-specific elasticities, including distance, adjacency, and common money. We found that Italian provinces are heterogeneous with respect to trade costs. These costs are influenced by lagged provincial per capita income and industrial structure. In turn, trade costs influence future provincial per capita income. This bidirectional relationship between trade costs and income is broadly consistent with the two-way causation process emphasized by the New Geographical Economics.
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Suggested Citation

  • Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Clark University, vol. 88(2), pages 137-163, April.
    • Handle: RePEc:bla:ecgeog:v:88:y:2012:i:2:p:137-163
    DOI: j.1944-8287.2012.01145.x
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    Cited by:

    1. Francesco Marchionne & Michele Fratianni & Federico Giri & Luca Papi, 2022. "Frequency vs. Size of Bank Fines in Local Credit Markets," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(3), pages 549-583, November.
    2. Pietro de Matteis & Filomena Pietrovito & Alberto Franco Pozzolo, 2016. "Determinants of exports: firm heterogeneity and local context," Questioni di Economia e Finanza (Occasional Papers) 352, Bank of Italy, Economic Research and International Relations Area.
    3. Fulvio Castellacci, 2014. "Service Firms Heterogeneity, International Collaborations and Export Participation," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 259-285, June.
    4. Florian Mölders & Ulrich Volz, 2011. "Trade creation and the status of FTAs: empirical evidence from East Asia," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(3), pages 429-456, September.
    5. Michele Fratianni, 2011. "Riflessioni sulla politica economica italiana in occasione del 150esimo anniversario dell'Unita'," Mo.Fi.R. Working Papers 53, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    6. Michele Fratianni, 2012. "150 years of Italian political unity and economic dualism: An Introduction," Rivista italiana degli economisti, Società editrice il Mulino, issue 3, pages 335-346.
    7. Liu, Xiaolu & Zhang, Yumei & Lan, Xiangmin & Si, Wei, 2025. "Can reducing agricultural trade costs foster the transformation of the agrifood system? Evidence from China," China Economic Review, Elsevier, vol. 91(C).
    8. Gabriele Beccari & Francesco Marchionne & Beniamino Pisicoli, 2022. "Alternative financing and investment in intangibles: evidence from Italian firms," Mo.Fi.R. Working Papers 174, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    9. Laura Márquez-Ramos, 2016. "Regionalism, subnational variation and gravity: A four-country tale," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 35, pages 7-36.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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