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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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References

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Citations

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Cited by:
  1. Martin Berka, 2009. "Nonlinear Adjustment in Law of One Price Deviations and Physical Characteristics of Goods," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 51-73, 02.
  2. E Pavlidis & I Paya & D Peel, 2009. "Real Exchange Rates and Time-Varying Trade Costs," Working Papers 600537, Lancaster University Management School, Economics Department.
  3. Malik, Adeel & Temple, Jonathan, 2006. "The Geography of Output Volatility," CEPR Discussion Papers 5516, C.E.P.R. Discussion Papers.
  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 0634, Faculty of Economics, University of Cambridge.
  5. Benjamin Bridgman, 2013. "Market entry and trade weighted import costs," Canadian Journal of Economics, Canadian Economics Association, vol. 46(3), pages 982-1013, August.
  6. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, 01.
  7. Jacks, David S. & Meissner, Christopher M. & Novy, Dennis, 2010. "Trade costs in the first wave of globalization," Explorations in Economic History, Elsevier, vol. 47(2), pages 127-141, April.
  8. Adrian Wood (QEH), . "Openness is a Matter of Degree: How Trade Costs Reduce Demand Elasticities," QEH Working Papers qehwps169, Queen Elizabeth House, University of Oxford.

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