Structural gravity equation with intensive and extensive margins

Journal article: Recent trade models with heterogenous firms have changed the interpretation of gravity equations. Chaney (2008) shows that the effect of distance on the number of exporters and average exports depend on key parameters characterizing the elements of market structure. We use firm-level export data to estimate the structural parameters of Chaney's model. Controlling for the fixed costs of exporting, our estimated parameters match, for 28 out of 34 industries, the model's theoretical predictions. Our industry parameters allow us to evaluate separately the effect of transport costs and tariffs on trade, without having to resort to detailed data on trade frictions.

Author(s)

Matthieu Crozet, Pamina Koenig

Journal
  • Canadian Journal of Economics / Revue Canadienne d’Économique
Date of publication
  • 2010
Keywords JEL
F12
Pages
  • 41-62
Version
  • 1
Volume
  • 43