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Is the Iceberg Melting Less Quickly? International Trade Costs after World War II

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  • Novy, Dennis

    (Department of Economics, University of Warwick)

Abstract

International trade costs are of vital importance because they determine trade patterns and therefore economic performance. This paper develops a new micro-founded measure of international trade costs. It is based on a multi-country general equilibrium model of trade that incorporates bilateral "ice-berg" trade costs. The model results in a gravity equation from which the implied trade costs can be easily computed. The trade cost measure is intuitive, takes multilateral resistance into account and yields empirical results that are economically sensible. It is found that during the post-WorldWar II period trade costs have declined markedly. The dispersion of trade costs across countries can best be explained by geographical and historical factors like distance and colonial linkages but also by tariffs and free trade agreements

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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 764.

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Date of creation: 2006
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Handle: RePEc:wrk:warwec:764

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Keywords: Trade Costs ; Gravity ; Distance ; Economic Integration;

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  1. Anne-Célia Disdier & Keith Head, 2004. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," Development Working Papers 186, Centro Studi Luca d\'Agliano, University of Milano.
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Citations

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Cited by:
  1. Dennis Novy, 2011. "Gravity Redux: Measuring International Trade Costs with Panel Data," CESifo Working Paper Series 3616, CESifo Group Munich.
  2. Adeel Malik & Jonathan R W Temple, 2005. "The Geography of Output Volatility," CSAE Working Paper Series 2005-07, Centre for the Study of African Economies, University of Oxford.
  3. Berka, Martin, 2006. "Non-linear adjustment in law of one price deviations and physical characteristics of goods," MPRA Paper 8606, University Library of Munich, Germany, revised Dec 2007.
  4. Pesaran, M.H. & Smith, R.P & Yamagata. T. & Hvozdyk, L., 2006. "Pairwise Tests of Purchasing Power Parity Using Aggregate and Disaggregate Price Measures," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0634, Faculty of Economics, University of Cambridge.
  5. Jacks, David S. & Meissner, Christopher M. & Novy, Dennis, 2010. "Trade costs in the first wave of globalization," Explorations in Economic History, Elsevier, Elsevier, vol. 47(2), pages 127-141, April.
  6. Adrian Wood (QEH), . "Openness is a Matter of Degree: How Trade Costs Reduce Demand Elasticities," QEH Working Papers, Queen Elizabeth House, University of Oxford qehwps169, Queen Elizabeth House, University of Oxford.
  7. Benjamin Bridgman, 2010. "Market Entry and Trade Weighted Import Costs," BEA Working Papers, Bureau of Economic Analysis 0067, Bureau of Economic Analysis.
  8. Povilas Lastauskas, 2013. "Europe’s Revolving Doors: Import Competition and Endogenous Firm Entry InstitutionS," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 1360, Faculty of Economics, University of Cambridge.
  9. Murat Genç & David Law, 2014. "A Gravity Model of Barriers to Trade in New Zealand," Treasury Working Paper Series 14/05, New Zealand Treasury.
  10. Pavlidis, Efthymios G. & Paya, Ivan & Peel, David A., 2011. "Real exchange rates and time-varying trade costs," Journal of International Money and Finance, Elsevier, Elsevier, vol. 30(6), pages 1157-1179, October.
  11. Povilas Lastauskas, 2013. "Europe's Revolving Doors: Import Competition and Endogenous Firm Entry Institutions," Kiel Advanced Studies Working Papers, Kiel Institute for the World Economy 464, Kiel Institute for the World Economy.

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