TY  - JOUR
AU  - Hillberry,Russell
AU  - Hummels,David
TI  - Explaining Home Bias in Consumption: The Role of Intermediate Input Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9020
PY  - 2002
Y2  - June 2002
UR  - http://www.nber.org/papers/w9020
L1  - http://www.nber.org/papers/w9020.pdf
N1  - Author contact info:
Russell Hillberry
Department of Economics
University of Melbourne
3010, VIC, Australia
Phone: +61 3 8344 5354
E-Mail: rhhi@unimelb.edu.au

David Hummels
Krannert School of Management
403 West State Street
Purdue University
West Lafayette, IN  47907-1310
Tel: 765/494-4495
Fax: 765/494-9658
E-Mail: hummelsd@purdue.edu
AB  - We show that 'home bias' in trade patterns will arise endogenously due to the co-location decisions of intermediate and final goods producers.  Our model identifies four implications of home bias arising out of specialized industrial demands.  Regions absorb different bundles of goods.  Buyers and sellers of intermediate goods co-locate.  Intermediate input trade is highly localized.  The effect of spatial frictions on trade are magnified.  These implications are examined and confirmed using a unique data source that matches the detailed subnational geography of shipments to the characteristics of the shipping establishments.  Our results broaden the measurement and interpretation of home bias, and provide new evidence on the role of intermediate inputs in concentrating production.
ER  -