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Abstract

This study examines the relationship between trade and potential determinants: GDP, FDI, unemployment rate in Spanish provinces while incorporting spatial dependence. This methodological paper contributes to the literature because it evaluates trade at a more disaggregated level and includes FDI to explain the trade pattern. The research concludes that: (1) Only considering GDP and unemployment rate; increase in economic growth or a decrease in unemployment rate could motivate trade in the province; likewise trade of the neighbors will increase the competition, which could decrease the province sales. (2) If FDI is included, FDI received by the neighbor provinces could decrease the exports of the province because it makes its rivals more productive and competitive.

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