IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/428.html
   My bibliography  Save this paper

Why Do Nations Trade (So Little)?

Author

Listed:
  • James E. Anderson

    (Boston College)

Abstract

There isn't nearly as much trade as standard models suggest there should be. Formal trade barriers and transport costs are too low to account for the difference. The pattern of missing trade has interesting variation across country pairs. These clues suggest the need for theoretical and eventually structural empirical work on the missing transactions costs. This paper reviews recent empirical findings and some promising research directions in search, predation and contract theory.

Suggested Citation

  • James E. Anderson, 1999. "Why Do Nations Trade (So Little)?," Boston College Working Papers in Economics 428, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:428
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/EC-P/wp428.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc.
    2. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    3. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    4. Anderson James E & Young Leslie, 2006. "Trade and Contract Enforcement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-36.
    5. John F. Helliwell, 1996. "Do National Borders Matter for Quebec's Trade?," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 507-522, August.
    6. Staiger, Robert W., 1995. "International rules and institutions for trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 29, pages 1495-1551, Elsevier.
    7. James E. Rauch & Alessandra Casella, 2003. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," Economic Journal, Royal Economic Society, vol. 113(484), pages 21-42, January.
    8. McLaren, John, 1999. "Supplier relations and the market context: A theory of handshakes," Journal of International Economics, Elsevier, vol. 48(1), pages 121-138, June.
    9. Horstmann, Ignatius J & Markusen, James R, 1996. "Exploring New Markets: Direct Investment, Contractual Relations and the Multinational Enterprise," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 1-19, February.
    10. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    11. Casella, Alessandra & Rauch, James E., 2002. "Anonymous market and group ties in international trade," Journal of International Economics, Elsevier, vol. 58(1), pages 19-47, October.
    12. Skaperdas, S. & Syropoulos, C., 1996. "Insecure Properties and the Stability of Exchange," Papers 95-96-8, California Irvine - School of Social Sciences.
    13. W. Bentley MacLeod, 1996. "Decision, Contract, and Emotion: Some Economics for a Complex and Confusing World," Canadian Journal of Economics, Canadian Economics Association, vol. 29(4), pages 788-810, November.
    14. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
    15. Jeffrey A. Frankel & Ernesto Stein & Shang-Jin Wei, 1998. "Continental Trading Blocs: Are They Natural or Supernatural?," NBER Chapters, in: The Regionalization of the World Economy, pages 91-120, National Bureau of Economic Research, Inc.
    16. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-638, June.
    17. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-564, September.
    18. James E. Anderson & Douglas Marcouiller, 1999. "Trade, Insecurity, and Home Bias: An Empirical Investigation," NBER Working Papers 7000, National Bureau of Economic Research, Inc.
    19. James E. Anderson & Douglas Marcouiller, 1997. "Trade and Security,I: Anarchy," NBER Working Papers 6223, National Bureau of Economic Research, Inc.
    20. Greif, Avner & Milgrom, Paul & Weingast, Barry R, 1994. "Coordination, Commitment, and Enforcement: The Case of the Merchant Guild," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 745-776, August.
    21. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    22. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
    23. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
    24. Keith Head & John Ries, 1998. "Immigration and Trade Creation: Econometric Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 47-62, February.
    25. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frank A.G. den Butter & Raphie Hayat, 0000. "Trade between China and the Netherlands: a Case Study of Globalization," Tinbergen Institute Discussion Papers 08-016/3, Tinbergen Institute.
    2. Noussair, C.N. & Plott, C. & Riezman, R., 2007. "Production, trade and exchange rates in large experimental economies," Other publications TiSEM 3bf683fe-0650-4e8a-8682-c, Tilburg University, School of Economics and Management.
    3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    4. Koeniger, Winfried, 2002. "Defensive Innovations," IZA Discussion Papers 454, Institute of Labor Economics (IZA).
    5. Jiří Schwarz, 2012. "Impact of institutions on cross-border price dispersion," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(4), pages 617-645, December.
    6. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
    7. Marjit, Sugata & Mandal, Biswajit, 2009. "General Trading Costs in Pure Theory of International Trade," MPRA Paper 19290, University Library of Munich, Germany.
    8. Maureen Lankhuizen & Henri L. F. de Groot & Gert‐Jan M. Linders, 2011. "The Trade‐Off between Foreign Direct Investments and Exports: The Role of Multiple Dimensions of Distance," The World Economy, Wiley Blackwell, vol. 34(8), pages 1395-1416, August.
    9. Gert-Jan Linders, 2004. "The Effect of Domestic Institutions on International Trade Flows: A sectoral analysis," ERSA conference papers ersa04p357, European Regional Science Association.
    10. Howard J. Wall, 2000. "Gravity model specification and the effects of the Canada-U.S. border," Working Papers 2000-024, Federal Reserve Bank of St. Louis.
    11. Mr. Enzo Croce & Mr. V. Hugo Juan-Ramon & Mr. Feng Zhu, 2004. "Performance of Western Hemisphere Trading Blocs: A Cost-Corrected Gravity Approach," IMF Working Papers 2004/109, International Monetary Fund.
    12. Shu Yu & Jakob de Haan & Sjoerd Beugelsdijk & Jakob de Haan, 2011. "Trade, Trust and Institutions," CESifo Working Paper Series 3571, CESifo.
    13. Enrico Spolaore, 2004. "Economic Integration, International Conflict and Political Unions," Rivista di Politica Economica, SIPI Spa, vol. 94(5), pages 3-50, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marianna Belloc, 2006. "Institutions and International Trade: A Reconsideration of Comparative Advantage," Journal of Economic Surveys, Wiley Blackwell, vol. 20(1), pages 3-26, February.
    2. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
    3. James E. Anderson & Douglas Marcouiller, 1999. "Trade, Insecurity, and Home Bias: An Empirical Investigation," NBER Working Papers 7000, National Bureau of Economic Research, Inc.
    4. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    5. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412, National Bureau of Economic Research, Inc.
    6. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    7. Tamara Mata & Carlos Llano, 2013. "Social networks and trade of services: modelling interregional flows with spatial and network autocorrelation effects," Journal of Geographical Systems, Springer, vol. 15(3), pages 319-367, July.
    8. Festus Ebo Turkson, 2011. "Logistics and Bilateral Exports in Developing Countries: A Multiplicative Form Estimation of the Logistics Augmented Gravity Equation," Discussion Papers 11/06, University of Nottingham, CREDIT.
    9. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2017. "Anti-Migration as a Threat to Internationalization?," Ratio Working Papers 302, The Ratio Institute.
    10. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2018. "Do Migrants Facilitate Internationalization? A Review of the Literature," Working Papers 2018:11, Örebro University, School of Business, revised 19 Dec 2019.
    11. Joshua J. Lewer & Hendrik Van den Berg, 2007. "Religion and International Trade: Does the Sharing of a Religious Culture Facilitate the Formation of Trade Networks?," American Journal of Economics and Sociology, Wiley Blackwell, vol. 66(4), pages 765-794, October.
    12. James E. Rauch & Alessandra Casella, 2003. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," Economic Journal, Royal Economic Society, vol. 113(484), pages 21-42, January.
    13. Swati Ghosh & Holger Wolf, 2000. "Is There a Curse of Location? Spatial Determinants of Capital Flows to Emerging Markets," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 137-156, National Bureau of Economic Research, Inc.
    14. James E. Anderson & Leslie Young, 2002. "Imperfect Contract Enforcement," NBER Working Papers 8847, National Bureau of Economic Research, Inc.
    15. Christopher R. Parsons & L. Alan Winters, 2014. "International migration, trade and aid: a survey," Chapters, in: Robert E.B. Lucas (ed.), International Handbook on Migration and Economic Development, chapter 4, pages 65-112, Edward Elgar Publishing.
    16. Noel Gaston & Douglas R. Nelson, 2013. "Bridging Trade Theory And Labour Econometrics: The Effects Of International Migration," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 98-139, February.
    17. Daniel L. Millimet & Thomas Osang, 2007. "Do state borders matter for U.S. intranational trade? The role of history and internal migration," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(1), pages 93-126, February.
    18. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2018. "Anti-Migration as a Threat to Internationalization? A Review of the Migration-Internationalization Literature," GLO Discussion Paper Series 287, Global Labor Organization (GLO).
    19. Michele Fratianni & Francesco Marchionne, 2011. "The Limits to Integration," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume I, chapter 9, Edward Elgar Publishing.
    20. Bogang Jun & Aamena Alshamsi & Jian Gao & Cesar A Hidalgo, 2017. "Relatedness, Knowledge Diffusion, and the Evolution of Bilateral Trade," Papers 1709.05392, arXiv.org.

    More about this item

    Keywords

    trade costs; gravity;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:428. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/debocus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.