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Market entry and trade weighted import costs

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  • Benjamin Bridgman

Abstract

Trade weighting is a common method of aggregating trade frictions. It will understate changes in these costs when there are non ad valorem trade costs and quality differences. Newly traded goods enter at higher trade costs than previously traded ones. Lower import costs shift trade to lowquality goods with higher measured trade costs. These effects are quantitatively important. U.S. import costs fall more than twice as fast as trade weighted measures from 1974 to 2004 after the impact of shifting quality and newly traded goods is accounted for. Empirical estimates that use trade weighting will underestimate the welfare impact of trade costs.

Suggested Citation

  • Benjamin Bridgman, 2013. "Market entry and trade weighted import costs," Canadian Journal of Economics, Canadian Economics Association, vol. 46(3), pages 982-1013, August.
  • Handle: RePEc:cje:issued:v:46:y:2013:i:3:p:982-1013
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    References listed on IDEAS

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    Cited by:

    1. Lin, Chin-Ho, 2015. "The impact of tariff rates on the probability of trade relationships survival: evidence from ASEAN+6 manufactured goods," MPRA Paper 71260, University Library of Munich, Germany.
    2. Bridgman, Benjamin, 2012. "The rise of vertical specialization trade," Journal of International Economics, Elsevier, vol. 86(1), pages 133-140.

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    JEL classification:

    • F1 - International Economics - - Trade

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