A Note on Trade Costs and Distance

Martina Lawless and Karl Whelan ()

No 7/RT/07, Research Technical Papers from Central Bank of Ireland

Abstract: One of the most famous and robust findings in international economics is that distance has a strong negative effect on trade. Bernard, Jensen, Redding, and Schott (2007) discuss how this can be decomposed into an effect due to the number of products and an effect due to average exports per product. Using US firm-level data, they show that distance has a strong negative effect on the number of products exported. However, they find that the intensive margin - average sales of individual products - is increasing with distance. We show that this apparently puzzling finding is consistent with models featuring firm heterogeneity in productivity and fixed costs associated with exporting to each market. We also show how evidence of this type can be used to derive new estimates of how distance affects fixed and variable trade costs and how these two costs combine to generate the distance effect on trade.

JEL-codes: F10 F12 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2007-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Working Paper: A Note on Trade Costs and Distance (2007)
Working Paper: A note on trade costs and distance (2007)
Working Paper: A note on trade costs and distance (2007)
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