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Michele Fratianni and Francesco Marchionne
 
''HETEROGENEITY IN TRADE COSTS''
( 2008, Vol. 6 No.48 )
 
 
In this paper, we test the hypothesis that higher economic development is associated with lower trade costs. Using exports from 103 Italian provinces to 188 countries over the period 1995-2004, we estimate distance elasticity, our measure of trade costs, through a gravity equation model of bilateral trade derived by Anderson and van Wincoop (2003). We use different methods to control for multilateral resistance. Results corroborate our hypothesis. We find that heterogeneity of trade costs in Italian provinces is high and that it is negatively associated with economic development.
 
 
Keywords: trade costs
JEL: F1 - Trade: General
O5 - Economywide Country Studies: General
 
Manuscript Received : Dec 12 2008 Manuscript Accepted : Dec 12 2008

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