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Product Heterogeneity, Intangible Barriers and Distance Decay: The Effect of Multiple Dimensions of Distance on Trade Across Different Product CategoriesMaureen LankhuizenVU University Amsterdam Thomas De GraaffVU University Amsterdam - Faculty of Economics and Business Administration Henri L. F. De GrootVU University Amsterdam - Department of Spatial Economics; Tinbergen Institute July 9, 2012 Tinbergen Institute Discussion Paper 12-065/3 Abstract: We empirically examine the heterogeneity in the effects of multiple dimensions of distance on trade across detailed product groups. Using finite mixture modeling on bilateral trade data at the 3-digit SITC level, we endogenously group product categories into an, a priori unknown, number of segments based on estimated coefficients of multiple dimensions of distance in the gravity equation. We find that institutional distance, whether countries belong to the same trade block and especially geographical distance are crucial and distinct factors to classify commodities in homogeneous groups.
Number of Pages in PDF File: 26 Keywords: bilateral trade, gravity models, distance, institutions, product heterogeneity, finite mixture modeling JEL Classification: F14, F21, F23 working papers seriesDate posted: July 11, 2012Suggested CitationContact Information
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