This study empirically examines the “magnification effect” proposed in Yi (2003, Journal of Political Economy). He demonstrated theoretically that, as the number of separable production stages increases, the magnitude of trade increases explosively through the reduction of trade costs. We investigate the existence of the magnification effect for intra-Asian trade in machinery industries. Specifically, we estimate a gravity equation for worldwide trade that includes tariffs and their interaction term with a dummy variable for intra-Asian trade. As a result, we found a significantly negative coefficient for this interaction term, especially in the electrical machinery industry, indicating that tariff reductions increase intra-Asian trade more greatly than other trade. These results are robust against endogeneity in tariffs and other confounding factors.
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雑誌名
IDE Discussion Paper
雑誌名(英)
IDE Discussion Paper
巻
821
発行年
2021-07
出版者
Institute of Developing Economies (IDE-JETRO)
著者版フラグ
publisher
JEL分類
JEL:F15 - Economic Integration
JEL:F53 - International Agreements and Observance • Internat …
Magnification effect in international production networks : evidence from Asia
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