Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108603
Authors: 
Cosar, A. Kerem
Grieco, Paul L. E.
Tintelnot, Felix
Year of Publication: 
2012
Series/Report no.: 
Koç University-TÜSİAD Economic Research Forum Working Paper Series 1228
Abstract: 
Using a micro-level dataset of wind turbine installations in Denmark and Germany, we estimate a structural oligopoly model with cross-border trade and heterogeneous firms. Our approach separately identifies border-related from distance-related variable costs and bounds the fixed cost of exporting for each firm. Variable border costs are large: equivalent to roughly 400 kilometers (250 miles) in distance costs, which represents 40 to 50 percent of the average exporter's total delivery costs. Fixed costs are also important; removing them would increase German firms' market share in Denmark by 10 percentage points. Counterfactual analysis indicates that completely eliminating border frictions would increase total welfare in the wind turbine industry by 5 percent in Denmark and 10 percent in Germany.
Subjects: 
trade costs
oligopoly
spatial competition
constrained MLE
JEL: 
F14
L11
L20
L60
R12
Document Type: 
Working Paper

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