OECD Economics Department Working Papers

ISSN :
1815-1973 (online)
DOI :
10.1787/18151973
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Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

 

What Explains the Volume and Composition of Trade?

Industrial Evidence from a Panel of Countries You or your institution have access to this content

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Author(s):
Åsa Johansson1, Przemyslaw Kowalski1, Eduardo Olaberría1, Dario Pellegrino
Author Affiliations
  • 1: OECD, France

Publication Date
18 June 2014
Bibliographic information
No.:
1128
Pages
38
DOI
10.1787/5jz2hz3tm6vj-en

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This paper quantifies the importance of different determinants of trade at the industry level using a sample of 54 OECD and non-OECD economies. The empirical methodology extends the approach of previous empirical studies to explicitly quantify the impact that trading partners’ factor endowments and policies have on bilateral trade, and to analyse the effect of tariffs on the volume and composition of trade. We find that distance, common language, common border and regional trade agreements are important determinants of overall trade, and that factor endowments, policies and institutions, of both the exporter and its trading partners, are main determinants of what and where a country exports. By contrast, we find that trade policies based on tariffs on imported goods not only generate negative spillovers to trading partners by reducing their exports, but they are also likely to reduce exports of countries that impose the tariffs, in particular in industries that rely more on intermediate goods.
Keywords:
intermediate input tariff, trade, factor endowments, industry specialisation
JEL Classification:
  • C23: Mathematical and Quantitative Methods / Single Equation Models; Single Variables / Panel Data Models; Spatio-temporal Models
  • F14: International Economics / Trade / Empirical Studies of Trade
  • O57: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies / Comparative Studies of Countries