Exploring the Intensive and Extensive Margins of World Trade

45 Pages Posted: 18 Oct 2004

See all articles by Wilhelm Kohler

Wilhelm Kohler

University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gabriel J. Felbermayr

University of Stuttgart-Hohenheim

Date Written: September 2004

Abstract

World trade evolves at two margins. Where a bilateral trading relationship already exists it may increase through time (intensive margin). But trade may also increase if a trading bilateral relationship is newly established between countries that have not traded with each other in the past (extensive margin). We provide an empirical dissection of post-World-War-II growth in manufacturing world trade along these two margins. We propose a "cornersolutions-version" of the gravity model to explain movements on both margins. A Tobit estimation of this model resolves the so-called "distance-puzzle". It also finds more convincing evidence than recent literature that WTO-membership enhances trade.

Keywords: F12, F15

JEL Classification: bilateral trade, globalization, gravity model

Suggested Citation

Kohler, Wilhelm K. and Felbermayr, Gabriel J., Exploring the Intensive and Extensive Margins of World Trade (September 2004). Available at SSRN: https://ssrn.com/abstract=606381 or http://dx.doi.org/10.2139/ssrn.606381

Wilhelm K. Kohler (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Gabriel J. Felbermayr

University of Stuttgart-Hohenheim ( email )

Keplerstra├če 17
D-70174 Stuttgart
Germany

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