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Structural gravity equation with intensive and extensive margins

Author

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  • Matthieu Crozet

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, PSE - Paris School of Economics)

  • Pamina Koenig

    (PSE - Paris School of Economics, Université Paris Est - PRES Université Paris-Est, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

Recent trade models with heterogenous firms have changed the interpretation of gravity equations. Chaney (2008) shows that the effect of distance on the number of exporters and average exports depend on key parameters characterizing the elements of market structure. We use firm-level export data to estimate the structural parameters of Chaney's model. Controlling for the fixed costs of exporting, our estimated parameters match, for 28 out of 34 industries, the model's theoretical predictions. Our industry parameters allow us to evaluate separately the effect of transport costs and tariffs on trade, without having to resort to detailed data on trade frictions.

Suggested Citation

  • Matthieu Crozet & Pamina Koenig, 2010. "Structural gravity equation with intensive and extensive margins," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00610937, HAL.
  • Handle: RePEc:hal:cesptp:hal-00610937
    DOI: 10.1111/j.1540-5982.2009.01563.x
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00610937
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    References listed on IDEAS

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    1. Pierre-Philippe Combes & Miren Lafourcade, 2005. "Transport costs: measures, determinants, and regional policy implications for France," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 319-349, June.
    2. Hélène Erkel-Rousse & Daniel Mirza, 2002. "Import price elasticities: reconsidering the evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 35(2), pages 282-306, May.
    3. Giorgio Barba Navaretti & Anthony J. Venables, 2006. "Multinational Firms in the World Economy," Economics Books, Princeton University Press, edition 1, number 7832.
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    More about this item

    Keywords

    Gravity; Trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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