The Changing Incidence of Geography

James Anderson () and Yoto Yotov
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Yoto Yotov: Drexel University

No 698, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Neglected properties of the structural gravity model offer a theoretically consistent method to calculate the incidence of estimated trade costs, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992-2003, incidence is on average some five times higher for sellers than for buyers. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in 'constructed home bias', the disproportionate share of local trade; and large but varying gains in real GDP. Aggregation biases gravity coefficients downward.

Keywords: geography; gravity model; rade costs; globalization (search for similar items in EconPapers)
JEL-codes: F10 D24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-int
Date: 2008-09-01
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Working Paper: The Changing Incidence of Geography (2008)
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