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International Trade Integration: A Disaggregated Approach

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  • Natalie Chen
  • Dennis Novy

Abstract

This paper investigates the sources and size of trade barriers at the industry level. We derive a micro-founded measure of industry-specific bilateral trade integration that has an in-built control for time-varying multilateral resistance. This trade integration measure is consistent with a broad range of recent trade models including the Anderson and van Wincoop (2003) framework, the Ricardian model by Eaton and Kortum (2002) and heterogeneous firms models. We use it to explore trade barriers for manufacturing industries in European Union countries between 1999 and 2003. We find a large degree of trade cost heterogeneity across industries. The most important trade barriers are transportation costs and policy factors such as Technical Barriers to Trade. Trade integration is generally lower for countries that opted out of the Euro or did not abolish border controls in accordance with the Schengen Agreement. Reductions in trade barriers explain about one-half of the growth in trade over the period 1999-2003 and are therefore a major driving force of the EU Single Market.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0908.

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Date of creation: Jan 2009
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Handle: RePEc:cep:cepdps:dp0908

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: Trade Integration; Gravity; Trade Costs; Multilateral Resistance; Industries; Disaggregation; European Union;

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References

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Citations

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Cited by:
  1. Yann Duval & Chorthip Utoktham, 2011. "Trade Facilitation in Asia and the Pacific: Which Policies and Measures affect Trade Costs the Most?," Working Paper Series 111, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  2. Cletus C. Coughlin & Dennis Novy, . "Is the International Border Effect Larger than the Domestic Border Effect? Evidence from U.S. Trade," Discussion Papers 09/29, University of Nottingham, GEP.
  3. Dennis Novy, 2011. "Gravity Redux: Measuring International Trade Costs with Panel Data," CESifo Working Paper Series 3616, CESifo Group Munich.
  4. Costas Arkolakis, 2009. "A Unified Theory of Firm Selection and Growth," CESifo Working Paper Series 2679, CESifo Group Munich.
  5. Hornok, Cecília, 2011. "Need for Speed: Is Faster Trade in the EU Trade-creating?," CEPR Discussion Papers 8451, C.E.P.R. Discussion Papers.
  6. Demian Calin-Vlad, 2013. "Eu enlargement and the gains from trade," FIW Working Paper series 108, FIW.
  7. Massimo Del Gatto & Filippo di Mauro & Joseph Gruber & Benjamin R. Mandel, 2011. "The revealed competitiveness of U.S. exports," International Finance Discussion Papers 1026, Board of Governors of the Federal Reserve System (U.S.).
  8. Peter McQuade, 2009. "The Evolution of International Trade on the Extensive and Intensive Margins," The Institute for International Integration Studies Discussion Paper Series iiisdp325, IIIS, revised Apr 2010.
  9. Richard Pomfret & Patricia Sourdin, 2010. "Trade Facilitation And The Measurement Of Trade Costs," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 145-163.
  10. Yann Duval & Chorthip Utoktham, 2011. "Trade costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation," Working Paper Series 411, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

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