Zeros, Quality and Space: Trade Theory and Trade Evidence

Richard Baldwin and James Harrigan

No 13214, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2007-07
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (164)

Published as Richard Baldwin & James Harrigan, 2011. "Zeros, Quality, and Space: Trade Theory and Trade Evidence," American Economic Journal: Microeconomics, American Economic Association, vol. 3(2), pages 60-88, May.

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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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