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The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs

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  • Alfonso Irarrazabal
  • Andreas Moxnes
  • Luca David Opromolla

Abstract

Casual empiricism suggests that additive trade costs, such as quotas, per-unit tariffs, and, in part, transportation costs, are prevalent. In spite of this, we have no broad and systematic evidence of the magnitude of these costs. We develop a new empirical framework for estimating additive trade costs from standard firm-level trade data. Our results suggest that additive barriers are on average 14 percent, expressed relative to the median price. The point estimates are strongly correlated with common proxies for trade costs. Using our micro estimates, we show that a reduction in additive trade costs produces much higher welfare gains and growth in trade flows than a similar reduction in multiplicative trade costs.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19236.

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Date of creation: Jul 2013
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Handle: RePEc:nbr:nberwo:19236

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Cited by:
  1. Marc J. Melitz & Stephen J. Redding, 2012. "Heterogeneous firms and trade," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 48928, London School of Economics and Political Science, LSE Library.
  2. Luis Castro & Ben Li & Keith E. Maskus & Yiqing Xie, 2014. "Fixed Export Costs and Export Behavior," CESifo Working Paper Series 4697, CESifo Group Munich.
  3. Paul S. Segerstrom & Ignat Stepanok, 2012. "Learning How to Export," Kiel Working Papers 1801, Kiel Institute for the World Economy.
  4. Peters, Katrin & Schnitzer, Monika, 2012. "Trade liberalization and credit constraints: Why opening up may fail to promote convergence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8942, C.E.P.R. Discussion Papers.
  5. Andreas Kropf & Philip Ulrich Sauré, 2012. "Fixed Costs per Shipment," Working Papers 2012-13, Swiss National Bank.
  6. Amandine AUBRY & Michal BURZYŃSKI, 2013. "The Welfare Impact of Global Migration in the OECD Countries," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013035, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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