Zeros, Quality, and Space: Trade Theory and Trade Evidence

Richard Baldwin and James Harrigan ()

American Economic Journal: Microeconomics, 2011, vol. 3, issue 2, pages 60-88

Abstract: Bilateral, product-level data exhibit a number of strong patterns that can be used to evaluate international trade theories, notably the spatial incidence of "export zeros" (correlated with distance and importer size), and of export unit values (positively related to distance). We show that leading theoretical trade models fail to explain at least some of these facts, and propose a variant of the Melitz model that can account for all the facts. In our model, high quality firms are the most competitive, with heterogeneous quality increasing with firms' heterogeneous cost. (JEL F11, F14, F40)

JEL-codes: F11 F14 F40 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mic.3.2.60
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Related works:
Working Paper: Zeros, Quality and Space: Trade Theory and Trade Evidence (2007)
Working Paper: Zeros, Quality and Space: Trade Theory and Trade Evidence (2007)
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