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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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File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper440.pdf
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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
Contact details of provider: Postal: Manor Rd. Building, Oxford, OX1 3UQ
Web page: http://www.economics.ox.ac.uk/
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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. 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.
  3. 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.
  4. James E. Anderson & Yoto V. Yotov, 2011. "Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002," NBER Working Papers 17003, National Bureau of Economic Research, Inc.
  5. Alberto Behar & Laia Cirera-i-Crivillé, 2013. "Does it Matter Who You Sign With? Comparing the Impacts of North–South and South–South Trade Agreements on Bilateral Trade," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 765-782, 09.
  6. 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.
  7. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2007. "Firms in International Trade," CEP Discussion Papers dp0795, Centre for Economic Performance, LSE.
  8. James E. Anderson & Yoto V. Yotov, 2008. "The Changing Incidence of Geography," NBER Working Papers 14423, National Bureau of Economic Research, Inc.
  9. 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.
  10. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  11. 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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