Exploring the intensive and extensive margins of world trade

Gabriel Felbermayr and Wilhelm K. Kohler

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: World trade evolves at two margins. Where a bilateral trading relationship already exists it may increase through time (intensive margin). But trade may also increase if a trading bilateral relationship is newly established between countries that have not traded with each other in the past (extensive margin). We provide an empirical dissection of post-World War II growth in manufacturing world trade along these two margins. We propose a "corner-solutions version" of the gravity model to explain movements on both margins. A Tobit estimation of this model resolves the so-called "distance puzzle". It also finds more convincing evidence than recent literature that WTO-membership enhances trade.

Date: 2006
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Citations: View citations in EconPapers (227)

Published in Review of World Economics 4 142(2006): pp. 642-674

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Related works:
Working Paper: Exploring the Intensive and Extensive Margins of World Trade (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenar:20610

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