Original scientific paper
https://doi.org/10.1080/1331677X.2016.1169702
Alternative measures of internal distance in estimating home bias in trade: the case of Croatia
Hrvoje Jošić
orcid.org/0000-0002-7869-3017
Mislav Jošić
Abstract
The existence of home bias in trade is considered as one of six main
puzzles in international economics. The measurement of the average
intra-national distance has become the crucial issue in estimating the
home bias in goods trade for countries with no internal trade data. The aim of this article is to demonstrate how different internal distance measurement affects home bias in trade. The results of the analysis indicate that sub-unit based weighted measures perform better in the assessment of Croatia’s internal distance than area based and measures based on relation to neighbour countries. In estimating the model, we use data on import values for Croatia according to standard gravity theory. Regression analysis corroborates theoretical assumptions regarding the impact of geographical distance of countries and transport costs on bilateral trade flows; imports from world are positively correlated with the GDP of imported countries and negatively correlated with the distance between them. The values of home bias variable for Croatia’s total imports were slightly higher than results obtained from previous explorations for EU countries meaning that there is still place for Croatia’s deeper integration into EU trade flows.
Keywords
International economics puzzles; home bias; trade; internal distance; Croatia
Hrčak ID:
171730
URI
Publication date:
22.12.2016.
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