Does trade creation by social and business networks hold in services?
Tamara de la Mata ()
Applied Economics, 2014, vol. 46, issue 13, 1509-1525
Abstract:
Recent literature on the border effect has shown that the intensity of trade in goods is positively correlated with the migration stocks between any pair of countries/regions. The number of references for business networks is more limited, but they are also related with a reduction on information costs. In this article we investigate whether such a relation holds also for Spanish domestic trade flows in consumer services. To this end, we use a gravity model rooted in the Dixit--Stiglitz--Krugman theoretical framework and a unique data set on interregional trade flows for some of the main tourism service sectors, namely, accommodations and restaurants. Our industry-specific analysis finds a large positive effect for restaurants but a more limited effect for accommodations. Forces driving the demand in each sector explain this result and suggest the idea that although social networks can act as a substitute of firms in some sectors at the same time they can enhance trade flows in other sectors. We perform the same kind of analysis with a data set (obtained by a similar method) for domestic trade in goods and discover a different response to social and business networks. Finally, we treat the potential endogeneity by taking the instrumental-variable approach of the Poisson pseudo-maximum likelihood estimator and thus obtain consistent results.
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:46:y:2014:i:13:p:1509-1525
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DOI: 10.1080/00036846.2013.877576
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