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Why Do Trade Costs Vary?

  • Richard Pomfret


    (School of Economics, University of Adelaide)

  • Patricia Sourdin


    (School of Economics, University of Adelaide)

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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Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2008-08.

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Length: 40 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:adl:wpaper:2008-08
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