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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
    as

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    References listed on IDEAS

    as
    1. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, pages 170-192.
    2. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 284-314.
    3. Amitrajeet Batabyal & Peter Nijkamp, 2003. "The environment in regional science: An eclectic review," Economics of Governance, Springer, pages 291-316.
    4. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, pages 691-751.
    5. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, pages 53-82.
    6. Rikhil Bhavnani & Natalia T. Tamirisa & Arvind Subramanian & David T. Coe, 2002. "The Missing Globalization Puzzle," IMF Working Papers 02/171, International Monetary Fund.
    7. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, pages 53-82.
    8. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    9. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    10. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 441-487.
    11. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
    12. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, pages 1-27.
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    More about this item

    Keywords

    geography; gravity model; rade costs; globalization;

    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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