 Heterogeneous firms, exporter networks and the effect of distance on international tradeJournal of International Economics, 2012, vol. 87, issue 1, 27-35 Abstract: Distance effects in gravity equations are high and are not decreasing over time. Given that technical change in transport technology is biased in favor of long distances, this constitutes a challenge for existing theoretical models. In line with recent empirical evidence, this paper introduces a spillover effect from the number of exporters to the fixed costs of exporting into a trade model with heterogeneous firms. Since less firms export to remote markets, the equilibrium fixed costs are increasing in distance. This creates an additional effect of distance on aggregate trade flows: while the intensive margin of trade is unaffected, the extensive margin is magnified. This magnification leads to higher predicted distance effects. In addition, it offers a new perspective on non-decreasing distance effects: a relatively moderate strengthening of the spillover over time is sufficient to generate a constant distance elasticity. Keywords: Gravity; Distance; Trade; Fixed costs; Networks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:87:y:2012:i:1:p:27-35 DOI: 10.1016/j.jinteco.2011.11.004 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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