A Test of Trade Theories When Expenditure is Home Biased

Details

Serval ID
serval:BIB_BD01A7BC84AE
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
A Test of Trade Theories When Expenditure is Home Biased
Journal
European Economic Review
Author(s)
Brülhart M., Trionfetti F.
ISSN
0014-2921
Publication state
Published
Issued date
2009
Peer-reviewed
Oui
Volume
53
Number
7
Pages
830-845
Language
english
Abstract
We develop a criterion to distinguish two dominant paradigms of international trade theory: homogeneous-goods perfectly competitive models, and differentiated-goods monopolistically competitive models. Our analysis makes use of the pervasive presence of home-biased expenditure. It predicts that countries' relative output and their relative home biases are positively correlated in differentiated-goods sectors (the "home-bias effect"), while no such relationship exists in homogeneous-goods sectors. This discriminating criterion turns out to be robust to a number of generalisations of the baseline model. Our empirical results, based on a world-wide cross-country data set, suggest that the differentiated-goods model fits particularly well for the machinery, precision engineering and transport equipment industries, which account for some 40% of sample manufacturing output.
Keywords
International specialisation, New trade theory, Home-market effects, Border effects
Web of science
Create date
12/03/2009 23:01
Last modification date
20/08/2019 15:31
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