IDEAS home Printed from https://ideas.repec.org/a/spr/weltar/v146y2010i4p709-730.html
   My bibliography  Save this article

Why do trade costs vary?

Author

Listed:
  • Richard Pomfret
  • Patricia Sourdin

Abstract

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.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Richard Pomfret & Patricia Sourdin, 2010. "Why do trade costs vary?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(4), pages 709-730, December.
    • Handle: RePEc:spr:weltar:v:146:y:2010:i:4:p:709-730
    DOI: 10.1007/s10290-010-0072-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10290-010-0072-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10290-010-0072-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Wilmsmeier, Gordon & Hoffmann, Jan & Sanchez, Ricardo J., 2006. "The Impact of Port Characteristics on International Maritime Transport Costs," Research in Transportation Economics, Elsevier, vol. 16(1), pages 117-140, January.
    2. Jane Korinek & Patricia Sourdin, 2010. "Clarifying Trade Costs: Maritime Transport and Its Effect on Agricultural Trade," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(3), pages 417-435.
    3. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(3), pages 791-819.
    4. Hummels, David L. & Schaur, Georg, 2010. "Hedging price volatility using fast transport," Journal of International Economics, Elsevier, vol. 82(1), pages 15-25, September.
    5. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    6. Freund, Caroline L. & Weinhold, Diana, 2004. "The effect of the Internet on international trade," Journal of International Economics, Elsevier, vol. 62(1), pages 171-189, January.
    7. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    8. Ricardo J Sánchez & Jan Hoffmann & Alejandro Micco & Georgina V Pizzolitto & Martín Sgut & Gordon Wilmsmeier, 2003. "Port Efficiency and International Trade: Port Efficiency as a Determinant of Maritime Transport Costs," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 5(2), pages 199-218, June.
    9. repec:idb:brikps:13138 is not listed on IDEAS
    10. Michael E. Waugh, 2010. "International Trade and Income Differences," American Economic Review, American Economic Association, vol. 100(5), pages 2093-2124, December.
    11. Pomfret, Richard & Sourdin, Patricia, 2009. "Have Asian trade agreements reduced trade costs?," Journal of Asian Economics, Elsevier, vol. 20(3), pages 255-268, May.
    12. Bruce A. Blonigen & Wesley W. Wilson, 2008. "Port Efficiency and Trade Flows," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 21-36, February.
    13. Clark, Ximena & Dollar, David & Micco, Alejandro, 2004. "Port efficiency, maritime transport costs, and bilateral trade," Journal of Development Economics, Elsevier, vol. 75(2), pages 417-450, December.
    14. Hillberry, Russell & Hummels, David, 2008. "Trade responses to geographic frictions: A decomposition using micro-data," European Economic Review, Elsevier, vol. 52(3), pages 527-550, April.
    15. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
    16. Julia Devlin & Peter Yee, 2005. "Trade Logistics in Developing Countries: The Case of the Middle East and North Africa," The World Economy, Wiley Blackwell, vol. 28(3), pages 435-456, March.
    17. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
    18. Jean-François Arvis & Gaël Raballand & Jean-François Marteau, 2010. "The Cost of Being Landlocked : Logistics Costs and Supply Chain Reliability," World Bank Publications - Books, The World Bank Group, number 2489, December.
    19. Carolyn L. Evans & James Harrigan, 2003. "Distance, time, and specialization," International Finance Discussion Papers 766, Board of Governors of the Federal Reserve System (U.S.).
    20. Berthelon, Matias & Freund, Caroline, 2008. "On the conservation of distance in international trade," Journal of International Economics, Elsevier, vol. 75(2), pages 310-320, July.
    21. Andrés, Luis & Cuberes, David & Diouf, Mame & Serebrisky, Tomás, 0. "The diffusion of the Internet: A cross-country analysis," Telecommunications Policy, Elsevier, vol. 34(5-6), pages 323-340, June.
    22. Markusen, James R. & Venables, Anthony J., 2007. "Interacting factor endowments and trade costs: A multi-country, multi-good approach to trade theory," Journal of International Economics, Elsevier, vol. 73(2), pages 333-354, November.
    23. Carolyn L. Evans & James Harrigan, 2005. "Distance, Time, and Specialization: Lean Retailing in General Equilibrium," American Economic Review, American Economic Association, vol. 95(1), pages 292-313, March.
    24. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
    25. Hummels, David & Lugovskyy, Volodymyr & Skiba, Alexandre, 2009. "The trade reducing effects of market power in international shipping," Journal of Development Economics, Elsevier, vol. 89(1), pages 84-97, May.
    26. Mauricio Mesquita Moreira & Christian Volpe Martincus & Juan S. Blyde, 2008. "Unclogging the Arteries: The Impact of Transport Costs on Latin American and Caribbean Trade," IDB Publications (Books), Inter-American Development Bank, number 13138, February.
    27. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
    28. Mesquita Moreira, Mauricio & Volpe Martincus, Christian & Blyde, Juan S., 2008. "Unclogging the Arteries: The Impact of Transport Costs on Latin American and Caribbean Trade," IDB Publications (Books), Inter-American Development Bank, number 264, March.
    29. John S. Wilson & Catherine L. Mann & Tsunehiro Otsuki, 2003. "Trade Facilitation and Economic Development: A New Approach to Quantifying the Impact," The World Bank Economic Review, World Bank, vol. 17(3), pages 367-389, December.
    30. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    31. Peter Egger, 2008. "On the Role of Distance for Bilateral Trade," The World Economy, Wiley Blackwell, vol. 31(5), pages 653-662, May.
    32. David Hummels & Volodymyr Lugovskyy, 2006. "Are Matched Partner Trade Statistics a Usable Measure of Transportation Costs?," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 69-86, February.
    33. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mary Amiti & Oleg Itskhoki & Jozef Konings, 2014. "Importers, Exporters, and Exchange Rate Disconnect," American Economic Review, American Economic Association, vol. 104(7), pages 1942-1978, July.
    2. Richard Pomfret & Richard Pomfret, 2014. "Expanding the Division of Labour: Trade Costs and Supply Chains in the Global Economy," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 54(3), pages 220-241, November.
    3. Murat Genç & David Law, 2014. "A Gravity Model of Barriers to Trade in New Zealand," Treasury Working Paper Series 14/05, New Zealand Treasury.
    4. Gita Gopinath & Oleg Itskhoki, 2011. "In Search of Real Rigidities," NBER Chapters, in: NBER Macroeconomics Annual 2010, volume 25, pages 261-309, National Bureau of Economic Research, Inc.
    5. Julia Spies & Joern Kleinert, 2011. "Transport Costs in International Trade," ERSA conference papers ersa11p625, European Regional Science Association.
    6. Lugovskyy, Oleksandr & Skiba, Alexandre, 2014. "Effect of distance on trade under slope heterogeneity and cross-correlated effects," Economics Discussion Papers 2014-30, Kiel Institute for the World Economy (IfW Kiel).
    7. Lawless, Martina & Morgenroth, Edgar, 2017. "Ireland’s international trade and transport connections," Papers WP573, Economic and Social Research Institute (ESRI).
    8. Kurt A. Hafner & Jörn Kleinert & Julia Spies, 2023. "Endogenous transport costs and international trade," The World Economy, Wiley Blackwell, vol. 46(3), pages 560-597, March.
    9. Gee Hee Hong & Nicholas Li, 2017. "Market Structure and Cost Pass-Through in Retail," The Review of Economics and Statistics, MIT Press, vol. 99(1), pages 151-166, March.
    10. Aktoty Aitzhanova & Shigeo Katsu & Johannes F. Linn & Vladislav Yezhov (ed.), 2014. "Kazakhstan 2050: Toward a Modern Society for All," Books, Emerging Markets Forum, edition 1, number kazakh2050, October.
    11. Chris Edmond & Virgiliu Midrigan & Daniel Yi Xu, 2015. "Competition, Markups, and the Gains from International Trade," American Economic Review, American Economic Association, vol. 105(10), pages 3183-3221, October.
    12. Yuko Imura, 2013. "Endogenous Trade Participation with Incomplete Exchange Rate Pass-Through," Staff Working Papers 13-30, Bank of Canada.
    13. Esteve-Pérez Silviano & Gil-Pareja Salvador & Paniagua Jordi & Llorca-Vivero Rafael, 2021. "Corruption and International Trade: A Re-assessment with Intra-National Flows," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 15(1), pages 187-198, January.
    14. Joern Kleinert & Julia Spies, 2011. "Endogenous Transport Costs in International Trade," IAW Discussion Papers 74, Institut für Angewandte Wirtschaftsforschung (IAW).
    15. Bianka Dettmer & Andreas Freytag & Peter Draper, 2013. "Check-in, departure and arrival times: Air cargo in Southern Africa?," Jena Economics Research Papers 2013-018, Friedrich-Schiller-University Jena.
    16. Rahul Anand & Ms. Kalpana Kochhar & Mr. Saurabh Mishra, 2015. "Make in India: Which Exports Can Drive the Next Wave of Growth?," IMF Working Papers 2015/119, International Monetary Fund.
    17. Salvador Gil-Pareja & Rafael Llorca-Vivero & José Antonio Martínez-Serrano, 2017. "Corruption and International Trade: A Comprehensive Analysis with Gravity," Working Papers 1705, Department of Applied Economics II, Universidad de Valencia.
    18. Yulin Hou & Yun Wang & Wenjun Xue, 2021. "What explains trade costs? Institutional quality and other determinants," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 478-499, February.
    19. Richard Pomfret & Patricia Sourdin, 2010. "Trade Facilitation And The Measurement Of Trade Costs," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 145-163.
    20. Dettmer, Bianka & Freytag, Andreas & Draper, Peter, 2014. "Air Cargo beyond Trade Barriers in Africa," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 29, pages 95-138.
    21. Logan Lewis, 2013. "Menu Costs, Trade Flows, and Exchange Rate Volatility," 2013 Meeting Papers 313, Society for Economic Dynamics.
    22. Pomfret, Richard & Sourdin, Patricia, 2009. "Have Asian trade agreements reduced trade costs?," Journal of Asian Economics, Elsevier, vol. 20(3), pages 255-268, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Patricia Sourdin & Richard Pomfret, 2012. "Trade Facilitation," Books, Edward Elgar Publishing, number 14596.
    2. Dettmer, Bianka & Freytag, Andreas & Draper, Peter, 2014. "Air Cargo beyond Trade Barriers in Africa," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 29, pages 95-138.
    3. Bianka Dettmer & Andreas Freytag & Peter Draper, 2013. "Check-in, departure and arrival times: Air cargo in Southern Africa?," Jena Economics Research Papers 2013-018, Friedrich-Schiller-University Jena.
    4. Scott Petty & Jose Asturias, 2012. "A Model of Trade with Endogenous Transportation Costs," 2012 Meeting Papers 1095, Society for Economic Dynamics.
    5. Thomas Orliac, 2012. "The economics of trade facilitation [L'économie de la facilitation des échanges]," SciencePo Working papers Main tel-03681980, HAL.
    6. Lux, Matthias, 2011. "Defying Gravity: The Substitutability of Transportation in International Trade," MPRA Paper 36395, University Library of Munich, Germany, revised Feb 2012.
    7. Richard Pomfret & Richard Pomfret, 2014. "Expanding the Division of Labour: Trade Costs and Supply Chains in the Global Economy," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 54(3), pages 220-241, November.
    8. Alberto Behar & Anthony J. Venables, 2011. "Transport Costs and International Trade," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 5, Edward Elgar Publishing.
    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. Dominik Boddin & Frank Stähler, 2018. "The Organization of International Trade," CESifo Working Paper Series 7378, CESifo.
    11. Christian Volpe Martincus, 2016. "Out of the Border Labyrinth: An Assessment of Trade Facilitation Initiatives in Latin America and the Caribbean," IDB Publications (Books), Inter-American Development Bank, number 96856, February.
    12. Blyde, Juan & Molina, Danielken, 2015. "Logistic infrastructure and the international location of fragmented production," Journal of International Economics, Elsevier, vol. 95(2), pages 319-332.
    13. Yulin Hou & Yun Wang & Wenjun Xue, 2021. "What explains trade costs? Institutional quality and other determinants," Review of Development Economics, Wiley Blackwell, vol. 25(1), pages 478-499, February.
    14. Helble, Matthias & Shepherd, Ben & Wilson, John S., 2007. "Transparency, trade costs, and regional integration in the Asia Pacific," Policy Research Working Paper Series 4401, The World Bank.
    15. Eugenia Go, 2020. "Trade implications of transport cost in the Philippines," Economics PhD Theses 0320, Department of Economics, University of Sussex Business School.
    16. Volpe Martincus, Christian, 2016. "Out of the Border Labyrinth: An Assessment of Trade Facilitation Initiatives in Latin America and the Caribbean," IDB Publications (Books), Inter-American Development Bank, number 7994, March.
    17. Asturias, Jose, 2020. "Endogenous transportation costs," European Economic Review, Elsevier, vol. 123(C).
    18. Gabriel F De Oliveira & Nicolas Peridy, 2019. "The trade-reducing effects of market power in international ports," Economics Bulletin, AccessEcon, vol. 39(4), pages 2674-2687.
    19. Borchert, Ingo & Mattoo, Aaditya, 2016. "The trade reducing effects of restrictions on liner shippingAuthor-Name: Bertho, Fabien," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 231-242.
    20. De Oliveira, Gabriel Figueiredo, 2014. "Determinants of European freight rates: The role of market power and trade imbalance," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 62(C), pages 23-33.

    More about this item

    Keywords

    Trade costs; Trade facilitation; F10; F13; O24;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:weltar:v:146:y:2010:i:4:p:709-730. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.