this paper what we know about foreign trade and in what ways our understanding has improved as a result of the last 20 years of research

Although economists have long been aware of Jensen's inequality, many econometric applications have neglected an important implication of it: the standard practice of interpreting the parameters of log-linearized models estimated by ordinary least squares as elasticities can be highly misleading in the presence of heteroskedasticity. This paper explains why this problem arises and proposes an appropriate estimator. Our criticism to conventional practices and the solution we propose extends to a broad range of economic applications where the equation under study is log-linearized. We develop the argument using one particular illustration, the gravity equation for trade, and apply the proposed technique to provide new estimates of this equation. We find significant differences between estimates obtained with the proposed estimator and those obtained with the traditional method. These discrepancies persist even when the gravity equation takes into account multilateral resistance terms or fixed effects

A fundamental obstacle to developing sound methods for network and traffic engineering in operational IP networks today is the inability of network operators to measure the traffic matrix. A traffic matrix provides, for every ingress ¢ point into the network and egress £ point

Will the Internet redefine the "core" and the "periphery," creating a new geography, with neighborhoods connected not with streams and roads but with wires and microwave transmissions? An analogy to previous transportation and communications improvements is frequently made today: the transportation revolution of the 20 century permitted the deagglomeration of much physical production, and the Internet will now permit the deagglomeration of the intellectual and immaterial activities of the economy. But this analogy is faulty, and its historical reasoning inaccurate. In this paper, we first point out that at the end of the 20 Century most exchanges of physical goods take place within geographically defined neighborhoods. Previous rounds of infrastructure improvement always had a double effect, permitting decentralization of certain activities while actually reinforcing the attraction of cities for others. This is because all technologies of economic transactions increase the complexity and timeliness of interactions, making possible new forms of variety and differentiation of outputs. This is then reflected in more complex intermediate divisions of labor, or overall roundaboutness of the economy. Many of the transactions required by such an economy are dependent on what we call "handshake" interactions, not mere "conversational" interactions, which are the kind made feasible at a distance by the Internet. Hence, the Internet , all the while permitting the further locational deconcentration of certain routinized activities will also participate in reinforcing the need for urban concentration as the principal means to carry out "handshaking" in the complex, variety-based parts of the economy whose development it will encourage.

We apply a gravity model to 1980-1996 annual non-fuel imports data for 58 countries to quantify the effects of recently created or revamped PTAs on trade. We modify the gravity equation to identify separate effects of PTAs on intra-bloc trade, members ’ total imports and their total exports and to test for significant changes in trade patterns following the creation of trade blocs. We find no indication that ‘new regionalism boosted intra-bloc trade significantly and we find trade diversion only for EU and EFTA. The latter also exhibit 'export diversion', which could indicate their imposing welfare costs on other countries. Latin American trade liberalization in the 1990s had a positive impact on bloc members ’ imports and, usually, exports.

Traffic engineering and traffic matrix estimation are often treated as separate fields, even though one of the major applications for a traffic matrix is traffic engineering. In cases where a traffic matrix cannot be measured directly, it may still be estimated from indirect data (such as link measurements), but these estimates contain errors. Yet little thought has been given to the effects of inexact traffic estimates on traffic engineering. In this paper we consider how well traffic engineering works with estimated traffic matrices in the context of a specific task; namely that of optimizing network routing to minimize congestion, measured by maximum link-utilization. Our basic question is: how well is the real traffic routed if the routing is only optimized for an estimated traffic matrix? We compare against optimal routing of the real traffic using data derived from an operational tier-1 ISP. We find that the magnitude of errors in the traffic matrix estimate is not, in itself, a good indicator of the performance of that estimate in route optimization. Likewise, the optimal algorithm for traffic engineering given knowledge of the real traffic matrix is no longer the best with only the estimated traffic matrix as input. Our main practical finding is that the combination of a known traffic matrix estimation technique and a known traffic engineering technique can get close to the optimum in avoiding congestion for the real traffic. We even demonstrate stability in the sense that routing optimized on data from one day continued to perform well on subsequent days. This stability is crucial for the practical relevance to off-line traffic engineering, as it can be performed by ISPs today.

General-equilibrium models based on increasing returns, product differentiation and monopolistic competition have attained a prominent position in trade theory and, more recently, in economic geography. This paper surveys empirical studies on issues raised by the new wave of theoretical thinking. There is a growing literature documenting spatial distributions of industries at country and regional levels, which focuses predominantly on the United States and the European Union. This body of work has produced robust findings as well as puzzles. Particular ambiguity appears in studies of location trends in the European Union. In addition, empirical researchers have devised methods to separate and test alternative theoretical paradigms. Analytical work confirms the complementarity and relevance of both neo-classical and “new ” models. Existing results, however, do not permit firm conclusions about the relative explanatory power of the main theoretical approaches for location patterns overall and in particular industries.

A recent paper [8] presented methods for several steps along the road to synthesis of realistic traffic matrices. Such synthesis is needed because traffic matrices are a crucial input for testing many new networking algorithms, but traffic matrices themselves are generally kept secret by providers. Furthermore, even given traffic matrices from a real network, it is difficult to realistically adjust these to generate a range of scenarios (for instance for different network sizes). This note is concerned with the first step presented in [8]: generation of a matrix with similar statistics to that of a real traffic matrix. The method applied in [8] is based on fitting a large number of distributions, and finding that the log-normal distribution appears to fit most consistently. Best fits (without some intuitive explanation for the fit) are fraught with problems. How general are the results? How do the distribution parameters relate? This note presents a simpler approach based on a gravity model. Its simplicity provides us with a better understanding of the origins of the results of [8], and this insight is useful, particularly because it allows one to adapt the synthesis process to different scenarios in a more intuitive manner. Additionally, [8] measures the quality of its fit to the distribution's body. This note shows that the tails of the distributions are less heavy than the log-normal distribution (a counterintuitive result for Internet traffic), and that the gravity model replicates these tails more accurately.

This paper uses a panel data set to estimate the effects of regional agreements on trade flows controlling for country pair, importer-year, and exporter-year fixed effects. These fixed effects capture all of the determinants of trade flows normally included in gravity model specifications as well as controlling for yearly shocks that affects countries ’ trade levels. In most cases, controlling for the fixed effects greatly reduces the estimated impact of regional agreements on trade. The estimates reveal that the average regional agreement has significant anticipatory effects on trade flows and continues to affect trade for up to 11 years after the trade deal begins. Customs unions influence trade over a longer period of time than do free trade areas. Finally, the paper shows that a trade agreement often has very different impacts on each of the countries involved and presents estimated trade effects for individual countries in year five of the agreements.

this paper, we are primarily concerned with the effects of IPRs on international trade flows. In a different paper (Primo Braga and Fink 1997), we discuss how tighter IPRs affect economic welfare through FDI, the transfer of technology, and domestic R&D. The following paragraphs give a brief summary of the associated static and dynamic costs and benefits for two trading economies that may arise only in response to changes in trade flows fostered by stronger IPRs. From a static, partial-equilibrium point of view, the source country of the trade flow is likely to gain from tighter protection, because it can capture increased monopoly profits from the sale of its goods abroad. In contrast, the static effects on the welfare of the destination country are likely to be negative: increased market power by foreign title holders leading to deadweight losses.