Trade Flows, Multilateral Resistance and Firm Heterogeneity

Alberto Behar () and Benjamin Nelson

No 440, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We present a gravity model that accounts for multilateral resistance, firm heterogeneity and country-selection into trade, while accommodating asymmetries in trade flows. A new equation for the proportion of exporting firms takes a gravity form: the extensive margin is also affected by multilateral resistance. If all countries reduce their trade frictions, the impact of multilateral resistance is so strong that bilateral trade falls in many cases. This is despite the larger trade elastictiies implied by firm heterogeneity. For isolated bilateral changes in trade frictions, multilateral resistance effects are small for most countries, but are large when big importers are involved.

Keywords: Gravity models; Multilateral resistance; Firm heterogeneity (search for similar items in EconPapers)
JEL-codes: F10 F12 F14 F17 (search for similar items in EconPapers)
Date: 2009-07-01
New Economics Papers: this item is included in nep-bec and nep-int
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Trade Flows, Multilateral Resistance, and Firm Heterogeneity (2012)
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