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The Geographic Space in International Trade: from Gravity to New Economic Geography

  • Cafiso, Gianluca

In this paper we discuss the foundations of two recent trade theories linked by the role that the space-dimension plays in this kind of models. The theories discussed are the Gravity Approach and the New Economic Geography. We dedicate much to the explanation of the micro-foundations of the gravity equation and to the solution of the Border Puzzle achieved in a relevant and innovative paper by Anderson and van Wincoop. Some upto-date empirical applications, which test or use Gravity and NEG relations, are discussed in order to show how much these two theories are used in empirical trade analysis.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20269.

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Date of creation: Sep 2007
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Handle: RePEc:pra:mprapa:20269
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  1. Evenett, S. J. & Keller, W., 1994. "On Theories Explaining the Success of the Gravity Equation," Working papers 9713, Wisconsin Madison - Social Systems.
  2. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  3. Chen, Natalie, 2002. "Intra-national versus International Trade in the European Union: Why do National Borders Matter?," CEPR Discussion Papers 3407, C.E.P.R. Discussion Papers.
  4. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
  5. James Harrigan, 2001. "Specialization and the Volume of Trade: Do the Data Obey the Laws?," NBER Working Papers 8675, National Bureau of Economic Research, Inc.
  6. Andrew Bernard & Joachim Wagner, 2001. "Export entry and exit by German firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 105-123, March.
  7. Stephen Redding & Anthony J. Venables, 2001. "Economic geography and international inequality," LSE Research Online Documents on Economics 3714, London School of Economics and Political Science, LSE Library.
  8. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  9. Melitz, Jacques, 2008. "Language and foreign trade," European Economic Review, Elsevier, vol. 52(4), pages 667-699, May.
  10. Carolyn L. Evans, 2001. "Border effects and the availability of domestic products abroad," Staff Reports 127, Federal Reserve Bank of New York.
  11. Head, Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers.
  12. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  13. 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.
  14. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  15. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
  16. Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
  17. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February.
  18. Jeffrey A. Frankel, 1998. "The Regionalization of the World Economy," NBER Books, National Bureau of Economic Research, Inc, number fran98-1, September.
  19. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series rwp01-013, Harvard University, John F. Kennedy School of Government.
  20. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
  21. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
  22. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," Center for International and Development Economics Research, Working Paper Series qt0sx02651, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  23. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
  24. 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.
  25. Robert C. Feenstra & James A. Markusen & Andrew K. Rose, 1998. "Undertstanding the Home Market Effect and the Gravity Equation: The Role of Differentiating Goods," NBER Working Papers 6804, National Bureau of Economic Research, Inc.
  26. Bergstrand, Jeffrey H, 1990. "The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade," Economic Journal, Royal Economic Society, vol. 100(403), pages 1216-29, December.
  27. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
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