The Changing Incidence of Geography
53 Pages Posted: 23 Oct 2008 Last revised: 30 Nov 2022
Date Written: October 2008
Abstract
The incidence of bilateral trade costs is calculated here using neglected properties of the structural gravity model, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992- 2003, incidence is on average some five times higher for sellers than for buyers. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in 'constructed home bias', the disproportionate predicted share of local trade; and large but varying gains in real GDP.
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