The Impact of Trade Costs on the European Regional Trade Network: An Empirical and Theoretical Analysis

32 Pages Posted: 27 Jul 2018

See all articles by Roberto Basile

Roberto Basile

University of L'Aquila - Faculty of Economics

Pasquale Commendatore

University of Naples Federico II - Faculty of Economics

Luca De Benedictis

University of Macerata; Luiss University

Ingrid Kubin

Vienna University of Economics and Business - Department of Economics

Date Written: August 2018

Abstract

Using intra‐European interregional trade data, we analyze the topology of the E.U. regional trade network. A triad census analysis confirms the intuition that the interregional trade network (and, thus, the European economic integration) is far from being complete. The majority of the E.U. interregional trade patterns are characterized by simple, at best bilateral, configurations. Moreover, we analyze the effect of trade costs in shaping the topological structure of the network. It emerges that the relative presence of simple trade configurations increases with distance, while the relative presence of more complex trade configurations decreases with distance. Finally, we discuss the theoretical underpinnings of these empirical facts through a simple new economic geography model with three regions. In this model, we analyze how trade costs shape the pattern of the trade network. On the whole we find a correspondence between theoretic and empirical results. However, details differ and they suggest directions for further research.

Suggested Citation

Basile, Roberto and Commendatore, Pasquale and De Benedictis, Luca and Kubin, Ingrid, The Impact of Trade Costs on the European Regional Trade Network: An Empirical and Theoretical Analysis (August 2018). Review of International Economics, Vol. 26, Issue 3, pp. 578-609, 2018, Available at SSRN: https://ssrn.com/abstract=3220082 or http://dx.doi.org/10.1111/roie.12314

Roberto Basile (Contact Author)

University of L'Aquila - Faculty of Economics ( email )

Roio Poggio, 67040
Italy

Pasquale Commendatore

University of Naples Federico II - Faculty of Economics ( email )

Napoli I-80138
Italy

Luca De Benedictis

University of Macerata ( email )

Via Crescimbeni 20
Macerata, MC 62100
Italy

HOME PAGE: http://docenti.unimc.it/luca.debenedictis

Luiss University ( email )

Viale Romania 32
Rome, 00198
Italy

Ingrid Kubin

Vienna University of Economics and Business - Department of Economics ( email )

Augasse 2-6
A-1090 Wien
Austria

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