American Economic Review: Vol. 100 No. 5 (December 2010)


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The Changing Incidence of Geography

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Anderson, James E., and Yoto V. Yotov. 2010. "The Changing Incidence of Geography." American Economic Review, 100(5): 2157-86.

DOI: 10.1257/aer.100.5.2157


The incidence of bilateral trade costs is calculated here using neglected properties of the structural gravity model, disaggregated by commodity and region, and re-aggregated into forms useful for economic geography. For Canada's provinces, 1992-2003, sellers' incidence is on average some five times higher than buyers' incidence. Sellers' incidence falls over time due to specialization, despite constant gravity coefficients. This previously unrecognized globalizing force drives big reductions in "constructed home bias," the disproportionate predicted share of local trade; and large but varying gains in real GDP. (JEL F11, F14, R12)

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Anderson, James E. (Boston College)
Yotov, Yoto V. (Drexel U)

JEL Classifications

F11: Neoclassical Models of Trade
F14: Country and Industry Studies of Trade
R12: Size and Spatial Distributions of Regional Economic Activity

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