International Economics

Spring 2006

Instructor Anzalone

Research Project: State Trade Patterns

There are many theories circulating that try to explain why nations trade with one another. One theory, the basic gravity equation of trade states that the export of state “x”’s goods to country “y” is a function of state “x”’s and country “y” ‘s gross domestic product as well as the physical distance of state “x” and country “y”.

Gross domestic product is included in order to account for the potential amount of output (think in terms of the PPF) for exports and the importing countries ability to absorb the goods/services. In addition, physical distance between markets is included to account for the cost of transporting goods. The empirical results of the basic gravity equation are quite solid when “economics distance” variables such as trade agreement membership, openness, etc… are taken into account.

For your research project, you will be examining data for an assigned state and report on the following:

  1. Structure of your assigned state’s exports to the world in 2005 (see table 1).
  1. Country destination of your assigned state’s exports in 2005 (see table 2). Identify your state’s top 20 markets in 2005. What is the amount exported to these countries? What percentage of your assigned state’s exports goes to each of these markets? What is the corresponding amount and share going to these countries for the U.S. as a whole?

What state characteristics (ex. State location, labor force make-up, etc…) and policy initiatives (ex. Foreign trade offices, state tax incentives, etc…) could have contributed to the observed pattern?

  1. Structure of your assigned states exports to NAFTA and EU countries in 2005 (see table 3). What is the share of a particular industry to total manufacturing exports? Is the structure of the state’s exports to the two regions the same? Why or why not?

Date Sources:

Project requirements:

  1. Students will turn in an essay paper addressing the questions above. A typical paper should include 8-9 typed double-spaced pages, excluding tables.
  2. Printed copies of the tables used for analysis
  3. Citations (generally 5-10) discussing the theories and supporting the information required to answer the above questions.

Starting early is essential for successful completion of this project! I will periodically request to view your progress with the project over the next several months.