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Zeros, quality and space : trade theory and trade evidence

Author: Richard E Baldwin; James Harrigan; National Bureau of Economic Research.
Publisher: Cambridge, Mass. : National Bureau of Economic Research, 2007.
Series: Working paper series (National Bureau of Economic Research), no. 13214.
Edition/Format:   eBook : Document : EnglishView all editions and formats
Summary:
Product-level data on bilateral U.S. exports exhibit two strong patterns. First, most potential export flows are not present, and the incidence of these "export zeros" is strongly correlated with distance and importing country size. Second, export unit values are positively related to distance. We show that every well-known multi-good general equilibrium trade model is inconsistent with at least some of these facts.  Read more...
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Material Type: Document, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: Richard E Baldwin; James Harrigan; National Bureau of Economic Research.
OCLC Number: 152606037
Description: 1 online resource (1 volume).
Series Title: Working paper series (National Bureau of Economic Research), no. 13214.
Responsibility: Richard Baldwin, James Harrigan.

Abstract:

Product-level data on bilateral U.S. exports exhibit two strong patterns. First, most potential export flows are not present, and the incidence of these "export zeros" is strongly correlated with distance and importing country size. Second, export unit values are positively related to distance. We show that every well-known multi-good general equilibrium trade model is inconsistent with at least some of these facts. We also offer direct statistical evidence of the importance of trade costs in explaining zeros, using the long-term decline in the relative cost of air shipment to identify a difference-in-differences estimator. To match these facts, we propose a new version of the heterogeneous-firms trade model pioneered by Melitz (2003). In our model, high quality firms are the most competitive, with heterogeneous quality increasing with firms' heterogeneous cost.

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