New determinants of bilateral trade: An empirical analysis for developed and developing countries

Abstract

In this dissertation, the pattern and direction of international trade flows will be analysed by taking into consideration different levels of development across countries in the world. A better understanding of the factors explaining trade will help authorities to define specific economic and industrial policies at macro and micro levels in order to promote trade and subsequently economic development and growth in countries at different stages of development.<br/>The dissertation analyses in greater detail the role of some of the variables recently considered as determinants of international trade flows. Technological innovation, geographical factors, cultural similarities and trade costs are the explanatory factors that will be investigated in depth. <br/>First, aggregated trade flows are modelled as a function of incomes, distance, technological innovation, geography and cultural similarities. Second, a disaggregated analysis is performed to investigate the effect of tariffs and transport costs on bilateral trade flows.<br/>Determinants of international trade flows may differ across both countries and sectors. Country and sector heterogeneity issues will therefore be considered when analysing international trade patterns.<br/>One of the main devices used to analyse the determinants of international trade flows is the gravity model of trade. Recently, some authors have referred to this model as the "workhorse" of empirical trade. In this dissertation, the gravity model is the main modelling framework used.