Date of Award

8-2012

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Legacy Department

Economics

Advisor

Baier, Scott

Committee Member

Mroz , Tom

Committee Member

Tamura , Robert F.

Committee Member

Sauer , Raymond D.

Abstract

This dissertation consisits of two chapters. Both chapters relate to the effects of trade resistence measures commonly used in the International Trade literature. The first chapter investigates the effects of trade costs on the extensive and intensive margins of trade. The second chapter uses a semi-nonparametric estimation technique to include zero trade trade values and adds additional flexibility to the estimation of trade costs.
Trade literature has made use of the gravity equation since its introduction by Tinbergen (1962) to measure the impact of trade barriers and country characteristics on bilateral trade flows. The new focus of the literature separates international trade into two separate components: 1) the extensive margin which describe the variety of products exported, and 2) the intensive margin which describes the volume of each variety exported. Research using the traditional gravity equation inherently assumes that for any change in trade cost only affects the intensive margin or variable costs. Industry level data is used to construct a modified gravity specification that allows for the separate analysis of the extensive and intensive margin as well as their specific contribution to the estimates of trade costs. It is shown that the extensive margin or fixed costs do have significant contribution to the estimates in previous research using the gravity equation. Additionally, the changing nature of trade costs investigated in past research will be shown to be in part due trade resistance measures increasing or decreasing on the intensive margin.
Recently, there has been increased interest in estimation techniques that allow for the presence of zeros for determining the impact covariates on international trade flows. Traditionally, the gravity equation has been used to measure trade resistance and geographic characteristics on bilateral trade. Recent methods have tried to correct for selection and heterogeneity bias created by the use of Ordinary Least Squares (OLS). Allowing zero trade values in the estimation process allows for the inclusion potentially useful information in the determination of the effects of trade costs on bilateral trade. This paper will use a semi-nonparametric estimation that will correct for selection and heterogeneity bias. Conditional density estimation (CDE) is a semi-nonparametric approach that allows for the inclusion of bilateral pairs with no observed trade and for an accurate estimate of the change in the expected value of trade given a change in the explanatory variable. The CDE method is a discrete approximation of the density function that mimics a discrete hazard rate analyses on the variable of interest conditional of the explanatory variables. The estimates of geographic distance and GDPs of each country are shown to be lower using the CDE than the standard gravity method of estimation.

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Economics Commons

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