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The Changing Incidence of Geography

Author

Listed:
  • James E. Anderson

    (Boston College)

  • Yoto V. Yotov

    (Drexel University)

Abstract

Neglected properties of the structural gravity model offer a theoretically consistent method to calculate the incidence of estimated trade costs, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992-2003, incidence is on average some five times higher for sellers than for buyers. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in 'constructed home bias', the disproportionate share of local trade; and large but varying gains in real GDP. Aggregation biases gravity coefficients downward.

Suggested Citation

  • James E. Anderson & Yoto V. Yotov, 2008. "The Changing Incidence of Geography," Boston College Working Papers in Economics 698, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:698
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    References listed on IDEAS

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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