Transient products but persistent trade patterns

Abstract

We have combined our findings of widespread bilateral trade-share persistence with some recent empirical evidence of substantial and rapid volatility in the country source of most products in order to extend the implications of this literature in several ways. In particular, we are able to infer that countries are frequently switching to very different products in their export bundles to particular destinations. We also argue that the evidence of rapid product turnover in trade is not inconsistent with traditional factor endowment trade pattern predictions, as has been inferred in the literature. Finally we find that sunk costs in international trade appear to be external to particular products going to particular destinations but internal to the sum total of bilateral trade.JEL codes: F14, F17