Gravity,trade integration,and heterogeneity across industries |
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| Institution: | 1. Departamento de Economía Aplicada, Facultad de Ciencias Económicas y Empresariales, Universitat de les Illes Balears, 07122, Palma de Mallorca, Spain;2. Departamento de Análisis Económico, Facultad de Ciencias Económicas y Empresariales, Universidad de La Laguna, 38071, Santa Cruz De Tenerife, Spain;3. Dpto. de Métodos Cuantitativos en Economía y Gestión, Facultad de Ciencias Económicas y Empresariales, Universidad de Las Palmas de Gran Canaria, 35017, Las Palmas, Spain |
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| Abstract: | We derive a micro-founded measure of bilateral trade integration that is consistent with a broad range of leading gravity models. This measure accounts for cross-industry heterogeneity by incorporating substitution elasticities estimated at the industry level. We then use it to provide a theory-based ranking of trade integration across manufacturing industries in European Union countries. In addition, we explore the determinants of trade integration, finding that substantial Technical Barriers to Trade in certain industries as well as high transportation costs associated with heavy-weight goods are the most notable trade barriers. |
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