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...

This paper introduces quality innovations with endogenous sunk costs in a heterogeneous firm model of international trade and derives implications for the gravity equation. The model predicts that the effect of fixed costs on exports and on the share of exporters is lower in industries with a...

Gravity equations have been used for more than 50 years to estimate ex post the partial effects of trade costs on international trade flows, and the well-known - and traditionally presumed exogenous - "trade-cost elasticity" plays a central role in computing general equilibrium trade-flow and...

We extend structural gravity models of bilateral trade flows to oligopolistic competition. We show that conventional gravity estimates do not only reflect trade costs but also market power. Our simple estimation procedure generalizes the standard gravity model and disentangles exogenous trade...

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....

This paper identifies a "border" effect in the absence of a border. The finding that trade between East- and West-Japan is 23.1 to 51.3 percent lower than trade within both country parts, is established despite the absence of an obvious east-west division due to historical borders, cultural...

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,...

Firms adjust to differences in market size and demand uncertainty by changing the frequency and size of their export shipments. In our inventory model, transportation costs and optimal shipment frequency are determined on the basis of demand as well as inventory and per shipments costs. Using a...

This paper derives a micro-founded gravity equation in general equilibrium based on a translog demand system that allows for endogenous markups and rich substitution patterns across goods. In contrast to standard CES-based gravity equations, trade is more sensitive to trade costs if the...

Helpman, Melitz and Rubinstein (2008) derive gravity equations to estimate effects of trade barriers on the intensive and extensive margins of trade. They exploit the frequency of zeros in aggregate bilateral trade data to identify effects on the extensive margin and to obtain controls for firm...