The determinants of bilateral trade

Huiwen Lai, Susan Chun Zhu

Research output: Journal article publicationJournal articleAcademic researchpeer-review

19 Citations (Scopus)

Abstract

In this paper we present a monopolistic competition model that incorporates asymmetric trade barriers and international differences in production costs. The model implies a highly non-linear bilateral trade equation. Estimation of this equation yields parameters for the elasticity of substitution and trade costs that are more reasonable than those found in previous studies. A simulation indicates that trade liberalization will shift trade from rich countries to poor countries and from within continental trading partners with preferential trade agreements to intercontinental trading partners.
Original languageEnglish
Pages (from-to)459-483
Number of pages25
JournalCanadian Journal of Economics
Volume37
Issue number2
DOIs
Publication statusPublished - 1 May 2004
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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