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Trade Costs and Trade Composition

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  • Danny McGowan
  • Chris Milner

Abstract

Do trade costs have consequences other than on the volume of international trade? In this paper we investigate whether countries’ trade costs act like other national endowments by affecting the composition of countries’ exports. Using an econometric approach that controls for endogeneity by accounting for potentially relevant omitted variables we find strong evidence for a sample of 37 industrialised and transition countries that national trade costs systematically affect the composition of trade and can be viewed therefore as a source of comparative advantage. Industries located in countries with low trade costs capture significantly higher shares of world exports where this effect is stronger in trade cost intensive industries.

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Bibliographic Info

Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 11/11.

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Handle: RePEc:not:notgep:11/11

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Keywords: Trade costs; comparative advantage; endowments; exports;

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Citations

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Cited by:
  1. Jonathan Timmis, . "The Internet and International Trade in Goods," Discussion Papers 12/08, University of Nottingham, GEP.
  2. Christian Soegaard, . "The Self-enforceability of Trade Agreements in the Presence of Trade Costs," Discussion Papers 11/26, University of Nottingham, GEP.
  3. Christian Gormsen, 2012. "The Declining Barriers to Foreign Direct Investments and How to See Them," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00676508, HAL.
  4. Jonathan Timmis, . "The Internet and International Trade in Goods," Discussion Papers 12/03, University of Nottingham, School of Economics.

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