Scale Economies in European Trade

    • Bologna October 2016
    • Presentation speakers
      • Laura Bonacorsi, Boston College, USA


    Using the gravity framework, I investigate the existence of economies of scale in trade costs for European international trade. 26 manufacturing sectors exhibit such scale economies: a 10% increase in trade volume corresponds on average to a 0.64% decrease in trade costs. It appears that the EU expansion affected these economies of scale, though this happened for some sectors only: trade with an EU partner entails scale elasticities 50% lower than trade with a non-EU member for 11 sectors out of the 26 considered. I also investigate whether scale elasticities can be rationalized by the existence of informational asymmetries. This does not seem to be the case at the sector level, since the degree of product homogeneity does not explain the observed cross sectoral variation. The scale coefficients are instead linked to country-specific institutional variables, such as the level of corruption: exporting to the country whose level of corruption is the lowest in the sample entails half the scale elasticity than exporting to the most corrupted one.