Empirical Methods in International Trade

Empirical Methods in International Trade

Essays in Honor of Mordechai Kreinin

Edited by Michael G. Plummer

Internationalization of the world economy has made trade a key factor in the growth potential of nearly every nation’s economy. Hence, economists have become increasingly interested in the determinants of international trade and competitiveness. Empirical Methods in International Trade captures the many aspects of this trend in globalization through practical techniques well-founded in economic theory. The authors, comprising some of the most influential applied international economists of their generation, use cutting-edge models to develop empirical approaches to critical aspects of economic interchange. These approaches are developed and explained carefully with the goal of making them accessible to a wide audience.

Chapter 6: Trade Pattern Persistence

James Cassing and Steven Husted

Subjects: economics and finance, international economics, methodology of economics


James Cassing and Steven Husted 1. INTRODUCTION In 1979, Jimmy Carter was President of the United States, the Berlin Wall was intact, as was the Soviet Union, the Tokyo Round was not implemented and the Uruguay Round was a decade away. Between 1980 and 2000, about 125 free-trade arrangements were negotiated and implemented, the EU expanded twice and adopted a common currency, and there was a capital market disruption in 1997 of historic proportions involving the former Soviet Union and many countries of East Asia.1 Through all of this the world economy grew by more than 70 percent and world trade grew by a remarkable 175 percent. Yet, in this chapter we provide evidence that the pattern of international trade for many countries appears to have remained relatively stable: principal trading partners do not change, and trade shares exhibit remarkable constancy. This trade pattern stability over a long period of time is not what economists usually predict. For example, Yarbrough and Yarbrough (2000 p. 74) echo the intuition of many economists when they write in their popular textbook: The evolution of comparative advantage over time implies that production and trade patterns will change over time as well, creating changes in the distribution of income and some difficult dilemmas for policymakers. These changes are evident even over a fairly short period of time. But examination of the market for aggregate imports for almost 100 countries over the last two decades of the twentieth century calls this fluidity of trade patterns into...

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