We build a model of tacit collusion between firms that operate in multiple markets to study the effects of trade costs. A key feature of the model is that cartel discipline is endogenous. Thus, markets that appear segmented are strategically linked via the incentive compatibility constraint....

Although empirical evidence shows that a lower trade cost and higher FDI may go hand in hand, the well-known “proximity-concentration” hypothesis does not support this view. We provide a simple explanation for this phenomenon. We show that a lower trade cost on the intermediate goods (with...

The distribution of transport infrastructure across space is the outcome of deliberate government planning that reflects a desire to unlock the welfare gains from regional economic integration. Yet, despite being one of the oldest government activities, the economic forces shaping the endogenous...

This work shows the asymmetric effect of the reduction in transportation costs across different sectors in the process of the Great Divergence. Specifically, the analysis indicates that reductions in transportation costs of industrial goods enhance convergence of the growth rates of trading...

This paper investigates the economic value of trade when prices of transportation services are endogenous to cross-market price spreads. This is relevant for liquefied natural gas (LNG) exports. LNG transportation capacity is limited in the short-run, and long lead-times are involved in...

This paper investigates the sources and size of trade barriers at the industry level. We derive a micro-founded measure of industry-specific bilateral trade integration that has an in-built control for time-varying multilateral resistance. This trade integration measure is consistent with a...

Iceberg transport costs are one of the main ingredients of modern trade and economic geography models: transport costs are modelled by assuming that a fraction of the goods shipped “melts in transit”. In this paper, we investigate whether the iceberg assumption applies to the costs of...

We develop a simple two-country model of international trade that assumes that there is a fixed cost of doing international trade. We show that this leads to multiple equilibria that can be Pareto-ranked. We examine the stability properties of these equilibria

Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a unique data set of exports from individual...