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Byline: Hakan Yilmazkuday
Trade patterns; Elasticity of substitution; Elasticity of distance;
The United States
This paper models and estimates bilateral trade patterns of U.S.
states in a CES framework and identifies the elasticity of substitution
across goods, the elasticities of substitution across varieties of each
good, and the good-specific elasticities of distance by using markup
values obtained from the production side. Compared to the international
trade literature, the elasticity of substitution estimates are lower
across both goods and varieties, while the elasticity of distance
estimates are higher. Although home-bias effects at the state level are
significant, there is evidence for decreasing effects over time.
Received 2 November 2009; Revised 22 August 2011; Accepted 23
(footnote) [star] The author would like to thank Jonathan Eaton, an
anonymous referee, Eric Bond, Meredith Crowley, Mario Crucini, Kevin
Huang, David Hummels, Kei-Mu Yi, seminar participants at Vanderbilt
University, Temple University, Midwest International Economics Meeting
participants in University of Illinois at Urbana-Champaign, SRSA Annual
Meeting participants in Arlington, VA-Washington, DC for their helpful
comments and suggestions. The usual disclaimer applies.