Transient products but persistent trade patterns

Abstract

PurposeThis paper aims to combine the authors' findings of widespread bilateral trade‐share persistence with some recent empirical evidence of substantial and rapid volatility in the country source of most products in order to extend the implications of this literature in several ways.Design/methodology/approachThe paper focuses on the behavior of aggregate bilateral trade flows for a large number of countries over the period 1980‐2000.FindingsThe paper infers that countries are frequently switching to very different products in their export bundles to particular destinations. It also argues that the evidence of rapid product turnover in trade is not inconsistent with traditional factor endowment trade pattern predictions, as has been inferred in the literature. Finally it finds that sunk costs in international trade appear to be external to particular products going to particular destinations but internal to the sum total of bilateral trade.Originality/valueThe novelty of this paper resides in documenting the remarkably constant bilateral trade shares of 93 countries over the past two decades and the combination of this result with other known trade pattern characteristics to arrive at important new conclusions.