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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 CESifo Group Munich in its series CESifo Working Paper Series with number 2595.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2595

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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. Hornok, Cecília, 2011. "Need for Speed: Is Faster Trade in the EU Trade-creating?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8451, C.E.P.R. Discussion Papers.
  2. Costas Arkolakis, 2009. "A Unified Theory of Firm Selection and Growth," CESifo Working Paper Series 2679, CESifo Group Munich.
  3. 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.
  4. Demian Calin-Vlad, 2013. "Eu enlargement and the gains from trade," FIW Working Paper series, FIW 108, FIW.
  5. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, 01.
  6. Peter McQuade, 2010. "The Evolution of International Trade on the Extensive and Intensive Margins," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp325, IIIS, revised Apr 2010.
  7. Cletus C. Coughlin & Dennis Novy, 2012. "Is the international border effect larger than the domestic border effect? Evidence from US trade," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 51507, London School of Economics and Political Science, LSE Library.
  8. Massimo Del Gatto & Filippo di Mauro & Joseph Gruber & Benjamin R. Mandel, 2011. "The revealed competitiveness of U.S. exports," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 1026, Board of Governors of the Federal Reserve System (U.S.).
  9. Yann Duval & Chorthip Utoktham, 2011. "Trade Facilitation in Asia and the Pacific: Which Policies and Measures affect Trade Costs the Most?," Working Paper Series, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 111, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  10. Yann Duval & Chorthip Utoktham, 2011. "Trade costs in the India-Mekong Subregion: Identifying Policy Priorities for Trade Facilitation," Working Paper Series, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) 411, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).

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