The agglomeration of exporters by destination
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Precise characterization of informational trade barriers is neither well documented nor understood. Using Russian customs data, we document that regional destination-specific export spillovers exist for developing countries, extending a result that was only known for developed countries. This result suggests behavior responding to a destination barrier. To account for this fact, we build on a monopolistic competition model of trade by postulating an externality in the international transaction of goods. We test the model’s prediction on region-level exports using Russian data and find improvement over gravity-type models without agglomeration. This finding has important development implications in that export policy that considers current trade partners may be more effective than policy that focuses only on the exporting country’s industries. Furthermore, our findings can be considered in the burgeoning literature refining transaction costs beyond the traditional iceberg cost.
JEL ClassificationD23 F12 L29
The authors thank Thomas Holmes, Yelena Tuzova, Anton Cheremukhin, and seminar participants at Amherst College, Vasser College, Washington State University, Kansas State University, University of Scranton, University of Richmond, and the Midwest International Trade Conference and New York Economics Association annual meetings. Cassey thanks Qianqian Wang and Pavan Dhanireddy for research assistance, and Jeremy Sage for help with ArcGIS. Cassey also thanks the Western Regional Science Association and the editors of the Annals of Regional Science. Portions of this research are supported by the Agricultural Research Center Project #0540 at Washington State University. This manuscript received the Springer Award for best paper by an early career scholar at the 51st Annual WRSA Meeting, Kaui HI, February 2012.
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