DP2020 | The Structure of Foreign Trade


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During the last two decades new research has greatly advanced our understanding of the structure of world trade. This article reviews the empirical literature that grew out of this effort. I emphasize the interplay between theory and empirical research that was an important driving force behind these developments. After reviewing early insights about the structure of foreign trade the discussion is in two parts. One part examines the links between factor endowments and trade flows. New research has produced important insights on the nature of these links, suggesting a central role for technological differences across countries. A second part examines determinants of the volume of trade, the share of intra-industry trade and evidence on economies of scale