The determinants of bilateral trade

Huiwen Lai and Susan Chun Zhu ()

Canadian Journal of Economics, 2004, vol. 37, issue 2, 459-483

Abstract: In this paper we present a monopolistic competition model that incorporates asymmetric trade barriers and international differences in production costs. The model implies a highly non-linear bilateral trade equation. Estimation of this equation yields parameters for the elasticity of substitution and trade costs that are more reasonable than those found in previous studies. A simulation indicates that trade liberalization will shift trade from rich countries to poor countries and from within continental trading partners with preferential trade agreements to intercontinental trading partners.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (20)

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