The Linder hypothesis during the globalization era

Estimating gravity coefficients with multiple layers of heterogeneity

“…Accordingly, Trade agreements, Language similarities, contiguity, and colonial links enhance trade, while the dissimilarity in demand structures (i.e., $$$ LIN{D}_{ijt} $$$), geographic distance, and landlockedness dampen international trade. These coefficients align with the existing literature (Anderson & Yotov, 2020; Bailey et al, 2021; Donaubauer et al, 2018; Fauceglia et al, 2018; Heid et al, 2021; Helble & Majoe, 2020; Kitenge, 2021; Ngepah & Udeagha, 2018; Nguyen, 2019; Santos Silva & Tenreyro, 2006; Yotov et al, 2016). Table 3A.1 also reveals negative interactions between colonial linkages and contiguity but positive interactions between landlockedness and contiguity and between landlockedness and colonial links in impacting international trade.…”

“…The estimates were likely to be higher in studies using recent periods. Yotov (2012) and Kitenge (2021) observed over-time variations in trade elasticities due to globalization; Alessandria et al (2020) showed that dynamic behaviors of exporting firms could be responsible for variations in trade elasticities over time, and Anderson and Yotov (2016) found variations in estimates depending on the presence or absence of time-varying variables such as the volume of trade leading to scale effects. According to Kitenge and Lahiri (2022), a higher ability to translate different languages could reduce the importance of language similarities in international trade.…”