Over the last 20 years the trade literature repeatedly documented the trade-reducing effects of inter- and intra-national borders. Thereby, the puzzling size and persistence of observed border effects from the beginning raised doubts on the role of underlying political borders. However, when...

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, such that the extensive margin is also affected by...

In this paper, we estimate a gravity equation properly accounting for omitted exporter and importer's overall trade resistance, through country yearly dummies for exporter and importer countries. We find that the omission of time varying multilateral trade resistance terms in the estimation of a...

The study aims to analyze the border effects on intra-African trade through the use of a gravity specification based on the monopolistic competition model of trade introduced by Krugman (1980). The study used CEPII data on trade flows between African countries over the period 1980-2006. We...

This paper derives the gravity equation with intermediate goods trade. We extend a standard monopolistic competition model to incorporate intermediate goods trade, and show that the gravity equation with intermediates trade is identical to the one without it except in that gross output should be...

I develop a theory of risk diversification through geography. In a general equilibrium trade model with monopolistic competition, characterized by stochastic demand, risk-averse entrepreneurs exploit the spatial correlation of demand across countries to lower the variance of their global sales....

Trade costs are crucial in new economic geography (NEG) models. The unavailability of actual trade costs data requires the approximation of trade costs. Most NEG studies do not deal with the ramifications of the particular trade costs specification used. This paper shows that the specification...

Was the collapse of world trade between 1928 and 1937 caused by higher transport costs, increased protectionism or the collapse of the gold standard? Using recent advances in the estimation of gravity equations, I examine the partial and general equilibrium effects of bilateral distance,...

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...

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...