Inter-city Trade

Tomoya Mori and Jens Wrona

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: We propose and apply a new theory-consistent algorithm, which uses disaggregated inter-city trade data to identify a pyramidic city system with central places and associated hinterlands. Because central places possess more industries than the cities in their hinterlands, and because industries, which are exclusive to central places, are more likely to export to the small, peripheral cities in the central place's hinterland, we find that aggregate exports from central places to their hinterlands are two to five times larger than predicted by gravity forces. Using a simple decomposition approach, we show that this upward bias results from aggregation along the extensive industry margin, which explains the much smaller and only marginally significant bias if estimation is conducted in a theory-consistent way at the disaggregated industry level.

Pages: 55 pages
Date: 2018-10
New Economics Papers: this item is included in nep-ure
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https://www.rieti.go.jp/jp/publications/dp/18e067.pdf (application/pdf)

Related works:
Working Paper: Inter-city Trade (2018)
Working Paper: Inter-city Trade (2018)
Working Paper: Inter-city trade (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:18067

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