Changing Trade Costs between People’s Republic of China and India
AbstractThis paper calculates the decline in costs involving merchandise trade between the People’s Republic of China (PRC) and India during the period 1980–2008. Drawing from the recent literature, a comprehensive measure of trade costs is derived from a theory-founded gravity model of international trade, which can be computed on the basis of observed bilateral trade flows and gross domestic product data. The analysis reveals that trade costs have declined sharply since the 1980s, accounting for a large and increasing portion of growth in total trade between the two countries. Whereas the reduction of trade costs accounted for less than one third of the increase in trade between the PRC and India during the 1980s, lower costs seem to explain about three quarters of trade expansion during the 1990s, and up to nearly 85% in 2001–2008.
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Bibliographic InfoPaper provided by Asian Development Bank in its series ADB Economics Working Paper Series with number 203.
Length: 19 pages
Date of creation: May 2010
Date of revision:
Trade costs; Gravity Model; Asia; China; India;
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- Shepherd, Ben, 2011. "Logistics costs and competitiveness: measurement and trade policy applications," MPRA Paper 38254, University Library of Munich, Germany.
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