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Exploring the Intensive and Extensive Margins of World Trade

In: European Economic Integration, WTO Membership, Immigration and Offshoring

Author

Listed:
  • Gabriel J Felbermayr
  • Wilhelm Kohler
Abstract
World trade evolves at two margins. Where a bilateral trading relationship already exists it may increase through time (intensive margin). But trade may also increase if a trading bilateral relationship is newly established between countries that have not traded with each other in the past (extensive margin). We provide an empirical dissection of post-World War II growth in manufacturing world trade along these two margins. We propose a “corner-solutions version” of the gravity model to explain movements on both margins. A Tobit estimation of this model resolves the so-called “distance puzzle”. It also finds more convincing evidence than recent literature that WTO-membership enhances trade.

Suggested Citation

  • Gabriel J Felbermayr & Wilhelm Kohler, 2014. "Exploring the Intensive and Extensive Margins of World Trade," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 4, pages 115-148, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814440196_0004
    as

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    More about this item

    Keywords

    Economic Integration; WTO Membership; Immigration; Offshoring; European Union; International Trade; Migration; Gravity; Germany; Equilibrium; Tariff Liberalization; Commercial Policy; Eastern Enlargement;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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