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Specialization and the volume of trade: do the data obey the laws?
The core subjects of trade theory are the pattern and volume of trade: which goods are traded by which countries, and how much of those goods are traded. The first part of this paper discusses evidence on comparative advantage, with an emphasis on carefully connecting theoretical models with data analyses. The second part of the paper considers the theoretical foundations of the gravity model and reviews the small number of studies that have tried to test, rather than simply use, the implications of gravity. Both parts of the paper yield the same conclusion: we are still in the very early ...
Working Paper
Trade and Terrorism: A Disaggregated Approach
This paper constructs a model of trade consequences of terrorism, where firms in trading nations face different costs arising from domestic and transnational terrorism. Using dyadic dataset in a gravity model, we test terrorism?s effects on overall trade, exports, and imports, while allowing for disaggregation by primary commodities and manufacturing goods. While terrorism has little or no influence on trade of primary products, terrorism reduces trade of manufactured goods. This novel finding pinpoints the avenue by which terrorism harms trade and suggests why previous studies that looked at ...
Working Paper
The Gravity of Experience
In this paper, we establish the importance of experience in international trade in reducing unmeasured trade costs and facilitating bilateral trade. We find a strong role for experience, measured in years of positive trade, for both aggregate and sectoral bilateral trade. In an augmented gravity framework, with a very comprehensive set of fixed-effects and trend variables, we find that a 1% increase in experience at the country-pair level increases bilateral exports by 0.417% and reduces trade costs by 0.105%. Non-parametric estimates imply that nine years of experience is equivalent to a ...
Working Paper
The Gravity of Experience
In this paper, we establish the importance of experience in international trade for reducing trade costs and facilitating bilateral trade. Within an augmented gravity framework, we find that an additional year of experience at the country-pair level reduces trade costs by 2.0% and increases bilateral exports by 8%. The effect of experience is stronger for country-pairs that are more distant, who do not share a common border, and who lack colonial and legal ties. Further, experience raises both the extensive and the intensive margins of trade. In a dynamic trade model with heterogeneous firms ...
Working Paper
The Gravity of Experience
In this paper, we establish the importance of experience in international trade in reducing unmeasured trade costs and facilitating bilateral trade. We find a strong role for experience, measured in years of positive trade, for both aggregate and sectoral bilateral trade. In an augmented gravity framework, with a very comprehensive set of fixed-effects and trend variables, we find that a 1% increase in experience at the country-pair level increases bilateral exports by 0.417% and reduces trade costs by 0.105%. Non-parametric estimates imply that nine years of experience is equivalent to a ...