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Product Heterogeneity, Intangible Barriers & Distance Decay: The effect of multiple dimensions of distance on trade across different product categories

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  • Maureen Lankhuizen
  • Thomas De Graaff
  • Henri De Groot

Abstract

This paper empirically examines the heterogeneity in the effects of multiple dimensions of distance on trade across detailed product groups. Using finite mixture modelling on bilateral trade data at the 3-digit SITC level, we endogenously group product categories into an, a priori unknown, number of segments based on estimated coefficients of multiple dimensions of distance in the gravity equation. The paper contributes to the literature by offering a new classification of products into homogeneous groups. We find that distance decay functions in a gravity model of international trade at a disaggregate level reveal a complex process that involve location characteristics (comparative and natural advantages, demand patterns or preferences) as well as intrinsic sensitivity of trade to multiple dimensions of distance. Keywords: bilateral trade, gravity models, cultural distance, institutions, product heterogeneity, finite mixture modelling JEL code: F14, F21, F23

Suggested Citation

  • Maureen Lankhuizen & Thomas De Graaff & Henri De Groot, 2012. "Product Heterogeneity, Intangible Barriers & Distance Decay: The effect of multiple dimensions of distance on trade across different product categories," ERSA conference papers ersa12p151, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa12p151
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    Cited by:

    1. Jienwatcharamongkhol, Viroj, 2012. "Distance Sensitivity of Export: A Firm-Product Level Approach," Working Papers 2012:33, Lund University, Department of Economics.
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    3. Viroj Jienwatcharamongkhol, 2014. "Distance Sensitivity of Export: A Firm-Product Level Approach," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 531-554, December.
    4. Ceren Ozgen & Thomas de Graff, 2013. "Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data," Norface Discussion Paper Series 2013012, Norface Research Programme on Migration, Department of Economics, University College London.

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    More about this item

    Keywords

    bilateral trade; gravity models; cultural distance; institutions; product heterogeneity; finite mixture modelling jel code: f14; f21; f23;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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