The Role of History in Bilateral Trade Flows

53 Pages Posted: 7 Feb 1997 Last revised: 1 Oct 2010

See all articles by Barry Eichengreen

Barry Eichengreen

University of California, Berkeley; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Douglas A. Irwin

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: May 1996

Abstract

This paper investigates the theory and evidence that history plays a role in shaping the direction of international trade. Because there are reasons to anticipate a positive correlation between the predominant direction of trade flows in the past and membership in preferential arrangements in the present, there may be a tendency to spuriously attribute to preferential arrangements the effects of historical factors and to exaggerate the influence of the former. Thus, the standard gravity-model formulation, which neglects the role of historical factors, suffers from omitted-variables bias. We illustrate these points by analyzing the evolution of trade between 1949 and 1964. We find that historical factors exercise an important influence on trade even after controlling for the arguments of the standard gravity model.

Suggested Citation

Eichengreen, Barry and Irwin, Douglas A., The Role of History in Bilateral Trade Flows (May 1996). NBER Working Paper No. w5565. Available at SSRN: https://ssrn.com/abstract=4623

Barry Eichengreen (Contact Author)

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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Douglas A. Irwin

Dartmouth College - Department of Economics ( email )

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United States
603-646-2942 (Phone)
603-646-2122 (Fax)

National Bureau of Economic Research (NBER)

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United States

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