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International Trade, OECD Membership, and Religion

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  • Heejoon Kang

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  • Michele Fratianni

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Abstract

Transaction costs in trade gravity equation are proxied by the distance that separates two trading partners, under the assumption that the distance elasticity is the same across all trading partners. We show that distance elasticity, however, critically depends on whether trading partners are industrial countries (i.e., members of the OECD) or share same religion. These heterogeneities are both statistically and economically significant. For instance, expected trade flows are the largest when an OECD member trades with a non-member and both are non-religious. Expected trade flows fall as much as by 62.9% between two non-religious, non-OECD members. Expected bilateral trade drops by 48.1% when both countries in the pair are OECD members while one is Christian and the other is Islamic. Both religion and OECD membership significantly affect the typical transaction costs implied by the gravity equation. Copyright Springer Science + Business Media, LLC 2006

Suggested Citation

  • Heejoon Kang & Michele Fratianni, 2006. "International Trade, OECD Membership, and Religion," Open Economies Review, Springer, vol. 17(4), pages 493-508, December.
  • Handle: RePEc:kap:openec:v:17:y:2006:i:4:p:493-508 DOI: 10.1007/s11079-006-0361-y
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    References listed on IDEAS

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    1. Fratianni, Michele & Kang, Heejoon, 2006. "Heterogeneous distance-elasticities in trade gravity models," Economics Letters, Elsevier, vol. 90(1), pages 68-71, January.
    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, April.
    3. Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72.
    4. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters,in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    5. Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 682-698, September.
    6. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, pages 106-116.
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    Cited by:

    1. repec:ebl:ecbull:v:6:y:2008:i:48:p:1-14 is not listed on IDEAS
    2. Michele Fratianni & Francesco Marchionne, 2011. "The Limits to Integration," Chapters,in: International Handbook on the Economics of Integration, Volume I, chapter 9 Edward Elgar Publishing.
    3. Michele Fratianni & Francesco Marchionne, 2008. "Heterogeneity In Trade Costs," Economics Bulletin, AccessEcon, vol. 6(48), pages 1-14.
    4. Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Clark University, vol. 88(2), pages 137-163, April.
    5. Balogh, Jeremiás Máté, 2016. "A földrajzi távolság, a kulturális hasonlóság és a szabadkereskedelem hatása a borkereskedelemre
      [Effects on the global wine trade of geographical distance, cultural and linguistic similarity, and
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 858-881.
    6. Douglas L. Campbell, 2010. "History, Culture, and Trade: A Dynamic Gravity Approach," EERI Research Paper Series EERI_RP_2010_26, Economics and Econometrics Research Institute (EERI), Brussels.
    7. Michele Fratianni & Francesco Marchionne, 2008. "Trade Costs and Provincial Heterogeneity in Italy," Working Papers 2008-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    8. Petra Bubáková, 2013. "Gravity Model of International Trade, Its Variables, Assumptions, Problems and Applications," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2013(2), pages 3-24.

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