Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Empirical Models of Trade Policy No. G5-V1
Globalization of economic activities and decentralization of government organization are occurring simultaneously. We consider the implications of government decentralization for intra-national and international trade. Decentralization can create barriers to intra-national trade, but can make international trade relatively more attractive. Imports as substitutes to inbound foreign direct investment suggest a stronger positive effect of decentralization on imports relative to exports. Our empirical results from a standard gravity model find supportive evidence for these conjectures.