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Trade Costs, Market Access and Economic Geography: Why the Empirical Specification of Trade Costs Matters

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  • Maarten Bosker
  • Harry Garretsen

Abstract

Trade costs are a crucial in new economic geography (NEG) models. The unavailability of actual trade costs data requires the approximation of trade costs. Most NEG studies do not deal with the ramifications of the particular trade costs specification used. This paper shows that the specification of trade costs matters. Estimations of a NEG wage equation for a sample of 80 countries show how the relevance of the key NEG variable, market access, depends upon the trade costs specification. Our conclusion is that NEG needs to (re-)examine the sensitivity of its empirical findings to the handling of trade costs.

Suggested Citation

  • Maarten Bosker & Harry Garretsen, 2007. "Trade Costs, Market Access and Economic Geography: Why the Empirical Specification of Trade Costs Matters," CESifo Working Paper Series 2071, CESifo.
    • Handle: RePEc:ces:ceswps:_2071
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    References listed on IDEAS

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    Cited by:

    1. Koji Nishikimi & Ikuo Kuroiwa, 2011. "Analytical Framework for East Asian Integration (1): Industrial Agglomeration and Concentrated Dispersion," Chapters, in: Masahisa Fujita & Ikuo Kuroiwa & Satoru Kumagai (ed.), The Economics of East Asian Integration, chapter 2, Edward Elgar Publishing.
    2. Thomas Y. Mathä & Allison Shwachman Kaminaga, 2017. "Regional wages and market potential in the enlarged EU: an empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 49(4), pages 376-385, January.
    3. Krieger-Boden, Christiane & Soltwedel, Rüdiger, 2010. "European economic integration in econometric modelling: Concepts, measures and illustration," Kiel Working Papers 1661, Kiel Institute for the World Economy (IfW Kiel).
    4. Grafeneder-Weissteiner, Theresa & Prettner, Klaus, 2009. "Agglomeration and population aging in a two region model of exogenous growth," Department of Economics Working Paper Series 125, WU Vienna University of Economics and Business.
    5. Maarten Bosker & Harry Garretsen, 2012. "Economic Geography and Economic Development in Sub-Saharan Africa," The World Bank Economic Review, World Bank, vol. 26(3), pages 443-485.
    6. Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Clark University, vol. 88(2), pages 137-163, April.
    7. Zouri, Stéphane, 2019. "Business cycles,bilateral trade and international financial intergration : Evidence from Economic Community of West African States (ECOWAS)," MPRA Paper 98748, University Library of Munich, Germany.
    8. Fingleton, Bernard, 2008. "Competing models of global dynamics: Evidence from panel models with spatially correlated error components," Economic Modelling, Elsevier, vol. 25(3), pages 542-558, May.
    9. Chiţu, Livia & Eichengreen, Barry & Mehl, Arnaud, 2014. "History, gravity and international finance," Journal of International Money and Finance, Elsevier, vol. 46(C), pages 104-129.
    10. Ploeckl, Florian, 2008. "Borders, Market Size and Urban Growth, The Case of Saxon Towns and the Zollverein in the 19th Century," Center Discussion Papers 229132, Yale University, Economic Growth Center.
    11. Steven Brakman & Harry Garretsen & Charles Van Marrewijk, 2009. "Economic Geography Within And Between European Nations: The Role Of Market Potential And Density Across Space And Time," Journal of Regional Science, Wiley Blackwell, vol. 49(4), pages 777-800, October.
    12. J.A. Bikker, 2009. "An extended gravity model with substitution applied to international trade," Working Papers 09-17, Utrecht School of Economics.
    13. Zouri, Stéphane, 2020. "Business cycles, bilateral trade and financial integration: Evidence from Economic Community of West African States (ECOWAS)," International Economics, Elsevier, vol. 163(C), pages 25-43.
    14. Zouri, Stéphane, 2019. "Business cycles,bilateral trade and international financial intergration : Evidence from Economic Community of West African States (ECOWAS)," MPRA Paper 95275, University Library of Munich, Germany.
    15. repec:dau:papers:123456789/6913 is not listed on IDEAS

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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