Zeros, Quality and Space: Trade Theory and Trade Evidence

Richard Baldwin and James Harrigan

No 6368, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Bilateral, product-level data exhibit a number of strong patterns that can be used to evaluate international trade theories, notably the spatial incidence of "export zeros" (correlated with distance and importer size), and of export unit values (positively related to distance). We show that leading theoretical trade models fail to explain at least some of these facts, and propose a variant of the Melitz model that can account for all the facts. In our model, high quality firms are the most competitive, with heterogeneous quality increasing with firms? heterogeneous cost.

Keywords: Heterogeneous-firm trade models; Qhft model; Quality and trade; Testing trade theories (search for similar items in EconPapers)
JEL-codes: F0 F11 F12 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (152)

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Related works:
Journal Article: Zeros, Quality, and Space: Trade Theory and Trade Evidence (2011)
Working Paper: Zeros, Quality and Space: Trade Theory and Trade Evidence (2007)
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