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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 low‐quality 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. Entrée sur le marché et coûts d'importation pondérés par les flux de commerce. La pondération par les flux de commerce est une méthode communément utilisée pour agréger les frictions commerciales. Cela tend à sous‐estimer les changements dans ces coûts quand ils ne sont pas ad valorem et qu'il y a différences de qualité. Les biens nouvellement transigés ont des coûts plus élevés que ceux qui l'ont été plus tôt. Des coûts d'importation moins élevés déplacent le commerce vers des biens de moindre qualité mais avec des coûts de commerce mesurés plus élevés. Ces effets sont quantitativement importants. Les coûts d'importation des États‐Unis ont chuté plus de deux fois plus vite que les mesures pondérées par les flux de commerce entre 1974 et 2004 une fois qu'on prend en compte l'impact sur la qualité et celui des biens nouvellement transigés. Les évaluations empiriques qui utilisent la pondération par les flux de commerce vont sous‐estimer l'impact des coûts de commerce sur le bien‐être.

Suggested Citation

  • Benjamin Bridgman, 2013. "Market entry and trade weighted import costs," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(3), pages 982-1013, August.
  • Handle: RePEc:wly:canjec:v:46:y:2013:i:3:p:982-1013
    DOI: 10.1111/caje.12044
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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.
    3. Chin‐Ho Lin, 2020. "Impact of tariff rates on the probability of trade relationship survival: Evidence from ASEAN+6 manufactured goods," Pacific Economic Review, Wiley Blackwell, vol. 25(4), pages 457-474, October.

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