Gravity, trade integration, and heterogeneity across industries

Natalie Chen and Dennis Novy

Journal of International Economics, 2011, vol. 85, issue 2, 206-221

Abstract: We derive a micro-founded measure of bilateral trade integration that is consistent with a broad range of leading gravity models. This measure accounts for cross-industry heterogeneity by incorporating substitution elasticities estimated at the industry level. We then use it to provide a theory-based ranking of trade integration across manufacturing industries in European Union countries. In addition, we explore the determinants of trade integration, finding that substantial Technical Barriers to Trade in certain industries as well as high transportation costs associated with heavy-weight goods are the most notable trade barriers.

Keywords: Trade integration; Gravity; Trade costs; Elasticity of substitution; Heterogeneity; European Union (search for similar items in EconPapers)
JEL-codes: F10 F15 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (141)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:85:y:2011:i:2:p:206-221

DOI: 10.1016/j.jinteco.2011.07.005

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