Journal Articles

Heterogeneity in Trade Costs

2008, Economics Bulletin

Michele U. Fratianni, Francesco Marchionne

Abstract

In this paper, we test the hypothesis that higher economic development is associated with lower trade costs. Using exports from 103 Italian provinces to 188 countries over the period 1995-2004, we estimate distance elasticity, our measure of trade costs, through a gravity equation model of bilateral trade derived by Anderson and van Wincoop (2003). We use different methods to control for multilateral resistance. Results corroborate our hypothesis. We find that heterogeneity of trade costs in Italian provinces is high and that it is negatively associated with economic development.

Citation

Michele Fratianni and Francesco Marchionne, "Heterogeneity of Trade Costs", Economics Bulletin, 2008, Vol.6, number 48:1-14.

Keywords

trade costs, heterogeneity, distance, gravity equation.