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Indirect measures of trade costs: Limitations and caveats

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  • Gervais, Antoine

Abstract

Trade barriers, which include transportation costs, tariffs, language barriers, and bureaucratic red tape, play a key role in the determination of trade flows. Because “direct” measures are only available for a few components, researchers have developed so-called “indirect” measures of trade costs, which estimate bilateral trade integration from cross-sectional variation in observed trade flows. The paper explores the theoretical and empirical determinants of these indirect measures of trade costs. The results suggest that, while they do capture variation in trade barriers, the indirect measures may also reflect variation in other factors, such as differences in tastes and production costs.

Suggested Citation

  • Gervais, Antoine, 2019. "Indirect measures of trade costs: Limitations and caveats," Economics Letters, Elsevier, vol. 176(C), pages 96-102.
    • Handle: RePEc:eee:ecolet:v:176:y:2019:i:c:p:96-102
    DOI: 10.1016/j.econlet.2018.12.027
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    References listed on IDEAS

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    More about this item

    Keywords

    International trade; Monopolistic competition; Production costs; Product quality; Trade costs;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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