Exploring the intensive and extensive margins of world trade
World trade evolves at two margins. Where a bilateral trading relationship already exists it may increase through time (intensive margin). But trade may also increase if a trading bilateral relationship is newly established between countries that have not traded with each other in the past (extensive margin). We provide an empirical dissection of post-World War II growth in manufacturing world trade along these two margins. We propose a "corner-solutions version" of the gravity model to explain movements on both margins. A Tobit estimation of this model resolves the so-called "distance puzzle". It also finds more convincing evidence than recent literature that WTO-membership enhances trade.
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|Date of creation:||2006|
|Date of revision:|
|Publication status:||Published in Review of World Economics 4 142(2006): pp. 642-674|
|Contact details of provider:|| Postal: |
Web page: http://www.vwl.uni-muenchen.de
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