Exploring the Intensive and Extensive Margins of World Trade
Gabriel Felbermayr () and
No 1276, CESifo Working Paper Series from CESifo Group Munich
World trade evolves at two margins. Where a bilateral trading relationship already exists it may increase through time (intensive margin). But trade may also increase if a trading bilateral relationship is newly established between countries that have not traded with each other in the past (extensive margin). We provide an empirical dissection of post-World-War-II growth in manufacturing world trade along these two margins. We propose a “corner-solutions-version” of the gravity model to explain movements on both margins. A Tobit estimation of this model resolves the so-called “distance-puzzle”. It also finds more convincing evidence than recent literature that WTO-membership enhances trade.
Keywords: bilateral trade; globalization; globalisation; gravity model (search for similar items in EconPapers)
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Journal Article: Exploring the Intensive and Extensive Margins of World Trade (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:ces:ceswps:_1276
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