The Margins of Trade: Market entry and Sector Spillovers, The Case of Italy (1862-1913)

Abstract

Between its Unification and WWI, Italy faced a period of increasing participation in the international economy. The growth of Italian exports was gradual, and alternately promoted by its intensive and extensive margins. In this paper, using a disaggregated database at country-product level, I first construct the intensive (average export per product) and extensive (number of products) margins of trade (for Italian imports and exports) and, second, within a quasi-gravity model framework, I estimate the drivers of market entry for Italian exports (1862-1913), with particular attention to the presence of eventual sector spillover effects. I find that the presence of “similar” exported products increased the probability of entry in the destination market (export spillovers), even if with diminishing marginal effects, potentially linked to a “saturation”/“congestion” of the market. Equally, I find that the higher the imports’ growth rate for a specific product, the more likely it was to be internationalised by Italian exporters (import spillovers).

Keywords: international trade, market entry, Italy, trade margins, export spillovers

JEL Classification: F14, N73