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The impact of trade costs on the European Regional Trade Network: An empirical and theoretical analysis
Author(s) -
Basile Roberto,
Commendatore Pasquale,
De Benedictis Luca,
Kubin Ingrid
Publication year - 2018
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12314
Subject(s) - intuition , economic integration , economics , international free trade agreement , simple (philosophy) , bilateral trade , regional trade , international trade , trade creation , economic geography , trade barrier , econometrics , free trade , geography , trade diversion , philosophy , archaeology , epistemology , china
Using intra‐European interregional trade data, we analyze the topology of the E.U. regional trade network. A triad census analysis confirms the intuition that the interregional trade network (and, thus, the European economic integration) is far from being complete. The majority of the E.U. interregional trade patterns are characterized by simple, at best bilateral, configurations. Moreover, we analyze the effect of trade costs in shaping the topological structure of the network. It emerges that the relative presence of simple trade configurations increases with distance, while the relative presence of more complex trade configurations decreases with distance. Finally, we discuss the theoretical underpinnings of these empirical facts through a simple new economic geography model with three regions. In this model, we analyze how trade costs shape the pattern of the trade network. On the whole we find a correspondence between theoretic and empirical results. However, details differ and they suggest directions for further research.