Agglomeration Matters for Trade

60 Pages Posted: 4 Nov 2013

See all articles by Roberto Ramos

Roberto Ramos

Banco de España

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Date Written: November 4, 2013

Abstract

We use a unique administrative dataset of Spanish exporters to document the existence of exporters’ geographical agglomeration by export destination. We reveal that firms selling to countries with worse business regulations, a dissimilar language and a different currency tend to cluster significantly more. We then assess the implications of exporters’ geographical agglomeration for firms’ behavior and for the estimated welfare gains from trade. On the one hand, we find that exporters engage in more stable trade relationships with those countries that are the export destinations of nearby firms. On the other, we introduce agglomeration in a model of international trade à la Melitz (2003). Using our Spanish firm-level data, we find that, relative to a model without agglomeration, taking this phenomenon into account increases the elasticity of welfare with respect to fixed trade costs by 44%

Keywords: agglomeration economies, export markets, firm heterogeneity

JEL Classification: R12, F14, D22, F12

Suggested Citation

Ramos, Roberto and Moral-Benito, Enrique, Agglomeration Matters for Trade (November 4, 2013). Banco de Espana Working Paper No. 1316. Available at SSRN: https://ssrn.com/abstract=2349549 or http://dx.doi.org/10.2139/ssrn.2349549

Roberto Ramos (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Enrique Moral-Benito

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
48
Abstract Views
5,390
PlumX Metrics