This paper assesses whether the sensitivity of bilateral trade volumes to various trade cost factors is constant or varies across countries. It utilizes a random coeffcients model and analyses a cross-sectional sample of bilateral trade data for 96 countries in 2005. We expect the elasticity of...

Using a gravity-type explanation of international trade flows at the industry level, it is shown that the pattern of comparative advantage in terms of sectoral export/import ratios in bilateral trade can be explained by relative income and relative per capita income. Total income of a country is...

Although the number of interstate disputes has fallen in the past 30 years, rising geopolitical competition is challenging the foundation of the absence of great power war. Additionally, the number of internal conflicts is surging. At the same time, globalisation has spun a net of global trade...

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...

To serve foreign markets, firms can either export or set up a local subsidiary through horizontal Foreign Direct Investment (FDI). The conventional proximity-concentration theory suggests that FDI substitutes for trade if distance between countries is large, while exports become more important...

Recent theoretical work on international trade emphasizes the importance of trade elasticity as the fundamental statistic needed to conduct welfare analysis. Eaton and Kortum (2002) proposed a two-step method to estimate this parameter, where exporter fixed effects are regressed on proxies for...

We propose and apply methods to quantify the impact of national institutions on international trade and development. We are able to identify the direct impact of country-specific institutions on international trade within the structural gravity framework. Our approach naturally addresses the...

A gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade. The panel data, bilateral observations for five years during 1970-90 covering 186 countries, includes 300+ observations in which both countries use the same currency. I...