The Rise of Trade Volumes, the Origin-Margin, and Per Capita Income
نویسنده
چکیده
Recent empirical literature documents the existence of an origin-margin in international trade: importers tend to increase the number of source countries per imported good. Along various dimensions, this trend for diversi cation strongly correlates with the increase in trade volumes. Existing explanations of the rise of world trade volumes cannot account for that parallel development. This paper jointly addresses the rise of trade volumes and the expansion of the origin-margin and suggests per capita income as a common determinant of both trends. It develops a model where varieties de ned as goods di¤erentiated by origin are non-essential in an otherwise standard love-for-variety utility. In presence of transportation costs consumers demand varieties from a strict sub-set of supplier countries. This sub-set expands as per capita income grows. The additional margin in the import-bundle induces milder decreasing returns from imported than from domestic varieties. Consequently, income growth shift expenditure shares towards imports and trade volumes rise. An additional section tests the papers key predictions and presents a calibration exercise. JEL-classi cation: F1, F4
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