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Why do trade costs vary?

  • Richard Pomfret

    ()

  • Patricia Sourdin

    ()

Trade theorists and policymakers have until recently ignored trade costs, but as tariffs have fallen it is apparent that trade costs are a significant obstacle to trade and they are not simply determined by geography or commodity characteristics. We analyse country-by-country variations in trade costs using disaggregated Australian import data. In Australia average trade costs are about 5% of the value of imports, compared to an average tariff of under 4%. Controlling for distance from Australia and the bulkiness of commodities, the paper examines other determinants of international trade costs in terms of exporting country characteristics. Country-specific characteristics which influence the size of trade costs may provide a direct link between institutions and economic growth.

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File URL: http://hdl.handle.net/10.1007/s10290-010-0072-8
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Article provided by Springer & Institut für Weltwirtschaft (Kiel Institute for the World Economy) in its journal Review of World Economics.

Volume (Year): 146 (2010)
Issue (Month): 4 (December)
Pages: 709-730

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Handle: RePEc:spr:weltar:v:146:y:2010:i:4:p:709-730
DOI: 10.1007/s10290-010-0072-8
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