The Difference in Regional Trade Margins and Its Determinants: Evidence from Korea

This paper decomposes the extensive and intensive margins of the 16 Korean regions’ exports over the sample period from 2000 to 2010, using regional export data dis-aggregated at the HS 10-digit level. We find that there is a large disparity in the extensive and intensive margins among Korean regions. Consistent with international trade theories, the size of a region’s economy (GDP, income, and population) has a significant and appropriately signed effect on the extensive and intensive margins. However, the effects work dominantly through the intensive margin rather than the extensive margin. We also find that regional innovation activity only has a positive effect on the extensive margin, and regional infrastructure variables are found to have a strong effect on the two margins. This paper contributes to the literature regarding the extensive and intensive margins of a country’s regional trade.