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Trade Costs And Trade Composition

  • CHRIS MILNER
  • DANNY McGOWAN

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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File URL: http://hdl.handle.net/10.1111/j.1465-7295.2012.00496.x
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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 51 (2013)
Issue (Month): 3 (07)
Pages: 1886-1902

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Handle: RePEc:bla:ecinqu:v:51:y:2013:i:3:p:1886-1902
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