Understanding Interstate Trade Patterns Hakan Yilmazkuday Journal - PowerPoint PPT Presentation

Understanding Interstate Trade Patterns Hakan Yilmazkuday Journal of International Economics 2012; JIE Volume 86, Issue 1, 58–166. Yilmazkuday (2012; JIE) Understanding Interstate Trade Patterns Volume 86, Issue 1, 58–166. 1 / 4

Highlights Interstate trade patterns are investigated within the U.S. The following elasticities are all identi…ed: Elasticity of substitution across goods Elasticity of substitution across varieties of each good Elasticity of distance for each good. Elasticity of substitution estimates are lower. Elasticity of distance estimates are higher. Home-bias e¤ects are decreasing over time. Yilmazkuday (2012; JIE) Understanding Interstate Trade Patterns Volume 86, Issue 1, 58–166. 2 / 4

Bilateral Interstate Trade at the Good Level Under CES, the bilateral trade value from state i to state r for good j is obtained as: �� � 1 � η j � �� � 0 1 � η j P j P j C j log + log B C i , i r r B C | {z } | {z } B C � � B C X j Source E¤ects Destination E¤ects = B C log r , i B � � � � C | {z } B C � δ j η j log D j θ j + log @ A Bilateral Trade of Good j r , i r , i | {z } | {z } Trade Costs Residuals η j is the elasticity of substitution across varieties of good j δ j is the elasticity of distance η j versus δ j are identi…ed using both trade and production-side data. Commodity Flow Survey data (2007; 2-digit) are used for trade. Gross markup data (from Census Bureau) are used for estimating η j ’s. The average η j (across industries) is estimated as 3 . 01. The average δ j (across industries) is estimated as 0 . 45. Yilmazkuday (2012; JIE) Understanding Interstate Trade Patterns Volume 86, Issue 1, 58–166. 3 / 4

Aggregate Interstate Trade at the Good Level Under CES, the good-level import value of state r for good j is obtained as: � � 0 1 P j ( 1 � ε ) � log r | {z } B C B C � � Constructed Price Index B C M j log = B � ( P r ) ε C r � C r | {z } @ A + log γ j + log r | {z } | {z } Total Imports of Good j State-Fixed E¤ects Residuals ε is the elasticity of substitution across goods P j r is constructed using estimated variables/parameters according to: 0 � δ j � 1 � η j 1 1 � 1 � η j � P j θ j P j D j @ ∑ A r � r , i i , i r , i i ε is estimated as 1 . 09. Yilmazkuday (2012; JIE) Understanding Interstate Trade Patterns Volume 86, Issue 1, 58–166. 4 / 4