Yilmazkuday, Hakan (2009): Understanding Interstate Trade Patterns.
Download (254Kb) | Preview
This paper models interstate trade patterns of U.S. states using a partial equilibrium trade model. The theoretical model deviates from the existing gravity literature by employing trade estimations in ratio form, with the ratio of imports from different sources, rather than the level of bilateral trade between two locations. Using this specification, together with considering the production side through technology levels, the elasticity of substitution across goods, the elasticity of substitution across varieties of each good, and the good specific elasticity of distance measures are all identified in the empirical analysis, which is not the case in gravity type studies. The ratio transformation also effectively eliminates any proportional distribution margin, international trade, or overstatement of distance measures from the theoretical trade equation. Compared to empirical international trade literature, the elasticity of substitution is estimated to be lower, while the elasticity of distance is estimated to be higher intranationally.
|Item Type:||MPRA Paper|
|Original Title:||Understanding Interstate Trade Patterns|
|Keywords:||Trade Ratios; Transportation; The United States|
|Subjects:||R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R13 - General Equilibrium and Welfare Economic Analysis of Regional Economies
R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Production Analysis, and Firm Location > R32 - Other Production and Pricing Analysis
R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity
|Depositing User:||Hakan Yilmazkuday|
|Date Deposited:||30. Jun 2009 00:21|
|Last Modified:||15. Feb 2013 23:05|
Achen, C.H., (1982), "Interpreting and Using Regression", Sage Publications, Beverly Hills, California.
Alvarez, Fernando and Lucas, Robert Jr., (2007), "General equilibrium analysis of the Eaton-Kortum model of international trade," Journal of Monetary Economics, 54(6): 1726-1768.
Anderson, J.E., (1979), "A Theoretical Foundation for the Gravity Equation", American Economic Review, 69(1): 106-116.
Anderson, J.E., and Wincoop, E.V., (2003), "Gravity with Gravitas: A Solution to the Border Puzzle", American Economic Review, 93(1): 170-192.
Anderson, J.E., and Wincoop, E.V., (2004), "Trade Costs", Journal of Economic Literature, 42: 691-751.
Bergstrand, J.H., (1985), "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence", The Review of Economics and Statistics, 67(3): 474-481.
Bergstrand, J.H., (1989), "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade", The Review of Economics and Statistics, 71(1): 143-153.
Berry, W.D., Fording, R.C., and Hanson, R.L., (2003), "Cost of Living Index for the American States, 1960-2003", Inter-University Consortium for Political and Social Research (ICPSR) Study No: 1275.
Broda, C., and Weinstein, D.E., (2006), "Globalization and the Gains from Variety", Quarterly Journal of Economics, 121(2): 541-585.
Corsetti, G., and Pesenti, P., (2005), "International Dimensions of Optimal Monetary Policy", Journal of Monetary Economics, 52: 281-305.
Deardorff, A. V. (1984): "Testing Trade Theories and Predicting Trade Flows," in Handbook of International Economics, Volume I, ed. by R. Jones and P. Kenen. Amsterdam: North-Holland.
Dixit, Avinash K. and Stiglitz, Joseph E., (1977), "Monopolistic Competition and Optimal Product Diversity", American Economic Review, 67(3): 297-308.
Donald, S.G. and Lang, K., (2007), "Inference with Difference in Differences and Other Panel Data", Review of Economics and Statistics, 89(2): 221-233
Dornbusch, R., Fischer, S., and Samuelson, P.A., (1977), "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods", The American Economic Review, 67(5): 823-839. .
Dornbusch, R., Fischer, S., and Samuelson, P.A., (1980), "Heckscher-Ohlin Trade Theory with a Continuum of Goods", Quarterly Journal of Economics, 95(2): 203-224.
Eaton, J., and Kortum, S., (2002), "Technology, Geography and Trade", Econometrica, 70(5): 1741-1779.
Erceg, C.J., Henderson, D.W., and Levin A.T., (2000), "Optimal Monetary Policy with Staggered Wage and Price Contracts", Journal of Monetary Economics, 46: 281-313.
Evenett, S. J., and W. Keller (2002): "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, 110, 281--316.
Gali, J. and Monacelli, T., (2005), "Monetary Policy and Exchange Rate Volatility in a Small Open Economy", Review of Economic Studies, 72: 707-734.
Gallaway, Michael P. , McDaniel, Christine A., and Rivera, Sandra A., (2003), "Short-run and long-run industry-level estimates of U.S. Armington elasticities", North American Journal of Economics and Finance 14: 49--68
Grossman, G. M., and E. Helpman (1995): "Technology and Trade," in The Handbook of International Economics, Volume III, ed. by G. M. Grossman and K. Rogoff. Amsterdam: North-Holland.
Grossman, G., (1998), "Comment on Deardorff", in The Regionalization of the World Economy. J.A. Frankel, ed. Chicago: U. Chicago Press, pp. 33--57.
Gujarati, D.N., (1995), "Basic Econometrics", McGraw-Hill, Singapore.
Harrigan, J., (1996), "Openness to Trade in Manufactures in the OECD", Journal of International Economics, 40: 23-39.
Head, K. and Ries, J., (2001), "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade", American Economic Review, 91(4): 858-876.
Head, K. and Mayer, T., (2001), "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade", CEPII Working Papers 2002-01.
Helpman, E. (1987): "Imperfect Competition and International Trade: Evidence from Fourteen Industrial Countries," Journal of Japanese and International Economics, 1: 62--81.
Helpman, E., Melitz, M. and Rubinstein, Y., (2008), "Estimating Trade Flows: Trading Partners and Trading Volumes", Quarterly Journal of Economics, 123(2): 441--487.
Henderson, D.J. and Millimet, D.L., (2008), "Is gravity linear?," Journal of Applied Econometrics, 23(2): 137-172.
Hillberry, R., and Hummels D., (2003), "Intranational Home Bias: Some Explanations", The Review of Economic and Statistics, 85(4):1089-1092.
Hummels, D., (1999), "Have International Transportation Costs Declined?", mimeo.
Hummels, D., (2001), "Toward a Geography of Trade Costs", mimeo.
Hummels, D., and J. Levinsohn (1995):"Monopolistic Competition and International Trade: Reconsidering the Evidence," Quarterly Journal of Economics, 110: 799--836.
Krugman, P., (1980), "Scale Economies, Product Differentiation, and the Pattern of Trade", American Economic Review, 70(5): 950-959.
Krugman, P., (1991), "Increasing Returns and Economic Geography", Journal of Political Economy, 99(3): 483-499.
Krugman, P. R. (1995): "Increasing Returns, Imperfect Competition, and the Positive Theory of International Trade," in The Handbook of International Economics, Volume III, ed. by G. M. Grossman and K. Rogoff. Amsterdam: North-Holland.
Krugman, P. R., and A. J. Venables (1995): "Globalization and the Inequality of Nations," Quarterly Journal of Economics, 110: 857--880.
Lopez, Rigoberto A., Pagoulatos, Emilio, Gonzalez, Maria A., (2006), "Home bias and U.S. imports of processed food products", North American Journal of Economics and Finance 17: 363--373
Matsuyama, K., (2000), "A Ricardian Model with a Continuum of Goods under Nonhomothetic Preferences: Demand Complementarities, Income Distribution, and North-South Trade", Journal of Political Economy, 108(6): 1093-1120.
Millimet, D., Osang, T., (2007), "Do state borders matter for U.S. intranational trade? The role of history and internal migration", Canadian Journal of Economics, 40(1): 93-126(34).
Moulton, Brent R., (1986), "Random group effects and the precision of regression estimates," Journal of Econometrics, 32(3): 385-397.
Romalis, J., (2007), "NAFTA's and CUSFTA's Impact on International Trade", The Review of Economics and Statistics, 89(3): 416-435
Rossi-Hansberg, E., (2005), "A Spatial Theory of Trade", American Economic Review, 95(5): 1464-1491.
Santos Silva, J. M. C. and Tenreyro, S., (2006). "The Log of Gravity," The Review of Economics and Statistics, 88(4): 641-658.
Wei, SJ, (1996), "Intranational versus International Trade: How Stubborn are Nations in Global Integration?", NBER Working Paper No: 5531.
Wolf, H., (2000), "Intra-National Home Bias in Trade", Review of Economics and Statistics, 82(4): 555-563.
Yilmazkuday, H., (2008), "How Important is Technology? A Counterfactual Analysis", mimeo.