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Agglomeration matters for trade

Roberto Ramos () and Enrique Moral-Benito ()

No 1316, Working Papers from Banco de España

Abstract: We use a unique administrative dataset of Spanish exporters to document the existence of exporters’ geographical agglomeration by export destination. We reveal that firms selling to countries with worse business regulations, a dissimilar language and a different currency tend to cluster significantly more. We then assess the implications of exporters’ geographical agglomeration for firms’ behavior and for the estimated welfare gains from trade. On the one hand, we find that exporters engage in more stable trade relationships with those countries that are the export destinations of nearby firms. On the other, we introduce agglomeration in a model of international trade à la Melitz (2003). Using our Spanish firm-level data, we find that, relative to a model without agglomeration, taking this phenomenon into account increases the elasticity of welfare with respect to fixed trade costs by 44%

Keywords: agglomeration economies; export markets; firm heterogeneity (search for similar items in EconPapers)
JEL-codes: D22 F12 F14 R12 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2013-11
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