We build a model of tacit collusion between firms that operate in multiple markets to study the effects of trade costs. A key feature of the model is that cartel discipline is endogenous. Thus, markets that appear segmented are strategically linked via the incentive compatibility constraint....

Recent contributions on off shoring often assume that firms can freely split their production process into separate steps which can be ranked according to the cost savings from producing abroad. We replace this assumption by the notion of a technologically determined sequence of production...

Iceberg transport costs are one of the main ingredients of modern trade and economic geography models: transport costs are modelled by assuming that a fraction of the goods shipped “melts in transit”. In this paper, we investigate whether the iceberg assumption applies to the costs of...

We develop a simple two-country model of international trade that assumes that there is a fixed cost of doing international trade. We show that this leads to multiple equilibria that can be Pareto-ranked. We examine the stability properties of these equilibria

Although empirical evidence shows that a lower trade cost and higher FDI may go hand in hand, the well-known “proximity-concentration” hypothesis does not support this view. We provide a simple explanation for this phenomenon. We show that a lower trade cost on the intermediate goods (with...

This paper investigates the economic value of trade when prices of transportation services are endogenous to cross-market price spreads. This is relevant for liquefied natural gas (LNG) exports. LNG transportation capacity is limited in the short-run, and long lead-times are involved in...

We quantify the effect of container technology on transport costs and trade by estimating the modal choice between containerization and breakbulk shipping using micro-level trade data. The model is motivated by novel facts that relate container usage to shipment, destination and firm...

For a long time globalization could be seen everywhere but in gravity estimates. We offer evidence how globalization affects manufacturing trade over the period 1986-2006 and show that, on average, the effect of distance has fallen whereas the effects of proximity and regional trade agreements...

We introduce transport cost of trade in products into the classical Zodrow and Mieszkowski (1986) model of capital tax competition. It turns out that even small levels of transport cost lead to a complete breakdown of the seminal result, the underprovision of public goods. Instead, there is a...