Distribution of Consumption, Production and Trade within the U.S.

HAKAN YILMAZKUDAY, VANDERBILT UNIVERSITY

Abstract

The current literature in economics is mainly focusing on the international trade and specialization, but much less about domestic (intranational) trade, despite the fact that the latter is orders of magnitude greater than the former. It would be hard to understand international trade without analyzing the patterns of domestic trade first. So, a natural question to ask is "what is the main motivation behind the domestic trade?". In this paper, we attempt to answer this question by introducing a model that considers the distributions of both production and consumption within the U.S. at disaggregate level. Instead of using bilateral trade data, which has been extensively used in the related empirical literature, we empirically test the net export implications of our model by using industry specific production and consumption data at state level. After controlling for the international trade flow together with intermediate input usage, the model is capable of explaining the trade patterns within the U.S.