Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/305606 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11364
Publisher: 
CESifo GmbH, Munich
Abstract: 
We build a general equilibrium model of endogenous communication, quality control and trade. We derive a structural gravity equation from the model and show that exogenous communication costs raise the costs of quality control and have a larger impact on products with a lower elasticity of substitution. In our empirical application, we estimate the impact of direct flight connectedness on communication costs using the gravity equation. We overcome the identification challenge using an instrumental variable constructed based on the discontinuity of direct flights at around 6,000-mile distance due to air travel regulations. We find that air connectedness increases trade, especially for products with a low elasticity. We combine the empirical estimates and our equilibrium model to quantify the aggregate impact of air connectedness.
Subjects: 
international direct flights
elasticity of substitution
face-to-face communication
JEL: 
F10
R40
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.