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Administrative Barriers and the Lumpiness of Trade

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  • Cecília Hornok
  • Miklós Koren

Abstract

We document that administrative trade costs of per shipment nature (documentation, customs clearance and inspection) lead to less frequent and larger-sized shipments, i.e., more lumpiness, in international trade. We build a model where consumers have heterogeneous preferences for the arrival time of a non-storable product and firms compete by selecting the time of their shipment. Per shipment costs reduce shipment frequency, increase the shipment size and the product price and lead to welfare losses. We provide empirical evidence for these effects on detailed export data from the US and Spain. We find that US and Spanish exporters send fewer and larger shipments to countries with higher administrative barriers. However, we find no robust evidence that such destination would command higher prices.

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Bibliographic Info

Paper provided by Department of Economics, Central European University in its series CEU Working Papers with number 2012_6.

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Date of creation: 01 Sep 2011
Date of revision: 01 Sep 2011
Handle: RePEc:ceu:econwp:2012_6

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References

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  1. James Harrigan & Carolyn Evans, 2004. "Distance, Time and Specialization," Econometric Society 2004 North American Winter Meetings 640, Econometric Society.
  2. David Hummels & Alexandre Skiba, 2002. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," NBER Working Papers 9023, National Bureau of Economic Research, Inc.
  3. Cecília Hornok, 2012. "Need for Speed: Is Faster Trade in the EU Trade-creating?," MNB Working Papers 2012/4, Magyar Nemzeti Bank (the central bank of Hungary).
  4. Roc Armenter & Miklós Koren, 2008. "A Balls-and-Bins Model of Trade," CeFiG Working Papers 3, Center for Firms in the Global Economy, revised 01 May 2008.
  5. Irarrazabal, Alfonso & Moxnes, Andreas & Opromolla, Luca David, 2010. "The Tip of the Iceberg: Modeling Trade Costs and Implications for Intra-Industry Reallocation," CEPR Discussion Papers 7685, C.E.P.R. Discussion Papers.
  6. Michael Engman, 2005. "The Economic Impact of Trade Facilitation," OECD Trade Policy Papers 21, OECD Publishing.
  7. Joseph Francois & Hans van Meijl & Frank van Tongeren, 2005. "Trade liberalization in the Doha Development Round," Economic Policy, CEPR & CES & MSH, vol. 20(42), pages 349-391, 04.
  8. George Alessandria & Joe Kaboski & Virgiliu Midrigan, 2007. "Lumpy Trade and Large Devaluations," Working Papers CAS_RN_2007_4, Laboratory for Macroeconomic Analysis.
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Cited by:
  1. Kropf, Andreas & Sauré, Philip, 2014. "Fixed costs per shipment," Journal of International Economics, Elsevier, vol. 92(1), pages 166-184.

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