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Trade Flows, Multilateral Resistance and Firm Heterogeneity

  • Alberto Behar
  • Benjamin D. Nelson

We present a gravity model that accounts for multilateral resistance, firm heterogeneity and country-selection into trade, while accommodating asymmetries in trade flows.� A new equation for the proportion of exporting firms takes a gravity form: the extensive margin is also affected by multilateral resistance.� If all countries reduce their trade frictions, the impact of multilateral resistance is so strong that bilateral trade falls in many cases.� This is despite the larger trade elastictiies implied by firm heterogeneity.� For isolated bilateral changes in trade frictions, multilateral resistance effects are small for most countries, but are large when big importers are involved.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 440.

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Date of creation: 01 Jul 2009
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Handle: RePEc:oxf:wpaper:440
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  1. Alberto Behar & Anthony J. Venables, 2011. "Transport Costs and International Trade," Chapters, in: A Handbook of Transport Economics, chapter 5 Edward Elgar.
  2. Behar, Alberto & Criville, Laia Cirera i, 2011. "Does it matter who you sign with ? comparing the impacts of north-south and south-south trade agreements on bilateral trade," Policy Research Working Paper Series 5626, The World Bank.
  3. Andrew Bernard & J. Bradford Jensen & Stephen Redding & Peter Schott, 2007. "Firms in International Trade," Working Papers 07-14, Center for Economic Studies, U.S. Census Bureau.
  4. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  5. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  6. James E. Anderson & Yoto V. Yotov, 2008. "The Changing Incidence of Geography," Boston College Working Papers in Economics 698, Boston College Department of Economics.
  7. Alberto Behar & Philip Manners & Benjamin D. Nelson, 2013. "Exports and International Logistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 75(6), pages 855-886, December.
  8. Peter Egger & Mario Larch & Kevin E. Staub & Rainer Winkelmann, 2011. "The Trade Effects of Endogenous Preferential Trade Agreements," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 113-43, August.
  9. Anderson, James & Yotov, Yoto, 2012. "Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002," School of Economics Working Paper Series 2012-3, LeBow College of Business, Drexel University.
  10. Baier, Scott L. & Bergstrand, Jeffrey H., 2009. "Bonus vetus OLS: A simple method for approximating international trade-cost effects using the gravity equation," Journal of International Economics, Elsevier, vol. 77(1), pages 77-85, February.
  11. André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), 2011. "A Handbook of Transport Economics," Books, Edward Elgar, number 12679, April.
  12. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
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