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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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References

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Citations

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Cited by:
  1. Peters, Katrin & Schnitzer, Monika, 2012. "Trade liberalization and credit constraints: Why opening up may fail to promote convergence," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 380, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. 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).
  3. Luis Castro & Ben Li & Keith Maskus & Yiqing Xie, 2014. "Fixed Export Costs and Export Behavior," Boston College Working Papers in Economics 855, Boston College Department of Economics.
  4. Paul S. Segerstrom & Ignat Stepanok, 2012. "Learning How to Export," Kiel Working Papers 1801, Kiel Institute for the World Economy.
  5. Melitz, Marc J & Redding, Stephen J., 2013. "Heterogeneous Firms and Trade," CEPR Discussion Papers 9317, C.E.P.R. Discussion Papers.
  6. Kropf, Andreas & Sauré, Philip, 2014. "Fixed costs per shipment," Journal of International Economics, Elsevier, vol. 92(1), pages 166-184.

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