Working Paper


Karl Whelan
Martina Lawless



firm heterogeneity transportation costs international trade costs market distance international economics firm level data individual

A note on trade costs and distance (2007)

Abstract One of the most famous and robust findings in international economics is that distancehas a strong negative effect on trade. Bernard, Jensen, Redding, and Schott (2007)discuss how this can be decomposed into an effect due to the number of products andan effect due to average exports per product. Using US firm-level data, they show that distance has a strong negative effect on the number of products exported. However, they find that the intensive margin—average sales of individual products—is increasing with distance. We show that this apparently puzzling finding is consistent with models featuring firm heterogeneity in productivity and fixed costs associated with exporting to each market. We also show how evidence of this type can be used to derive new estimates of how distance affects fixed and variable trade costs and how these two costscombine to generate the distance effect on trade.
Collections Ireland -> University College Dublin -> Economics Working Papers & Policy Papers
Ireland -> University College Dublin -> School of Economics
Ireland -> University College Dublin -> College of Social Sciences and Law

Full list of authors on original publication

Karl Whelan, Martina Lawless

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Karl Whelan
University College Dublin
Total Publications: 70