Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121224
Authors: 
Egger, Peter
Pfaffermayr, Michael
Year of Publication: 
2011
Series/Report no.: 
FIW Research Reports 2010/11-07
Abstract: 
This paper develops a structural empirical general equilibrium model of aggregate bilateral trade with path dependence of country-pair level exporter status. Such path dependence is motivated through informational costs about serving a foreign market for first-time entry of (firms in) an export market versus continued export services to that market. We embed the theoretical model into a structural dynamic stochastic econometric model of bilateral selection into import markets and apply it to a data-set of aggregate bilateral exports among 120 countries over the period 1995-2004. In particular, we disentangle the role of changes in trade costs, in labor endowments, and in total factor productivity for trade, bilateral market entry, numbers of firms active, and welfare. Dynamic gains from trade differ significantly from static ones, and path-dependence in market entry cushions effects of impulses in fundamental variables that are detrimental to bilateral trade.
Subjects: 
Bilateral trade flows
Gravity equation
Dynamic random effects model
Sample selection
JEL: 
F10
F12
F17
Document Type: 
Research Report

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