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Extensive and intensive trade margins: a state-by-state view

  • Cletus C. Coughlin

This paper examines a topic of increasing interest, the potential determinants of extensive (i.e., number of firms) and intensive (i.e., average exports per firm) trade margins, using state-level trade to 190 countries. In addition to distance and country size, other factors affecting trade costs and export demand are explored. In state-by-state regressions, these other factors exhibit more consistent and statistically significant effects on the extensive than on the intensive trade margin. One noteworthy finding is that U.S. foreign direct investment has a positive effect on both margins. In regressions using all state-level data simultaneously, some factors affect both margins, but not necessarily in the same way. For example, the impact of the communications infrastructure in the importing country affects the extensive margin positively and the intensive margin negatively. Finally, reasons for differences across states, such as state size and trade missions, are identified.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2012-002.

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Date of creation: 2012
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Handle: RePEc:fip:fedlwp:2012-002
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  1. Ines Buono & Guy Lalanne, 2010. "The effect of the Uruguay Round on the intensive and extensive margins of trade," Temi di discussione (Economic working papers) 743, Bank of Italy, Economic Research and International Relations Area.
  2. Coughlin, Cletus C & Wall, Howard J., 2011. "Ethnic networks and trade: Intensive vs. extensive margins," MPRA Paper 30758, University Library of Munich, Germany.
  3. Persson, Maria, 2010. "Trade Facilitation and the Extensive Margin," Working Paper Series 828, Research Institute of Industrial Economics.
  4. Antoine Berthou & Lionel Fontagné, 2008. "The Euro and the Intensive and Extensive Margins of Trade: Evidence from French Firm Level Data," Working Papers 2008-06, CEPII research center.
  5. Russell Hillberry & David Hummels, 2005. "Trade Responses to Geographic Frictions: A Decomposition Using Micro-Data," NBER Working Papers 11339, National Bureau of Economic Research, Inc.
  6. Timothy J. Kehoe & Kim J. Ruhl, 2009. "How important is the new goods margin in international trade?," Staff Report 324, Federal Reserve Bank of Minneapolis.
  7. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  8. Martina Lawless, 2010. "Deconstructing gravity: trade costs and extensive and intensive margins," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1149-1172, November.
  9. Andrew J. Cassey, 2011. "State Foreign Export Patterns," Southern Economic Journal, Southern Economic Association, vol. 78(2), pages 308-329, October.
  10. Simeon Djankov & Caroline Freund & Cong S. Pham, 2010. "Trading on Time," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 166-173, February.
  11. Cletus C. Coughlin, 2010. "Measuring international trade policy: a primer on trade restrictiveness indices," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 381-394.
  12. James R. Markusen, 2010. "Expansion of Trade at the Extensive Margin: A General Gains-from-Trade Result and Illustrative Examples," NBER Working Papers 15926, National Bureau of Economic Research, Inc.
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