IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Trade Booms, Trade Busts, and Trade Costs

  • David S. Jacks
  • Christopher M. Meissner
  • Dennis Novy

What has driven trade booms and trade busts in the past and present? We derive a micro-founded measure of trade frictions from leading trade theories and use it to gauge the importance of bilateral trade costs in determining international trade flows. We construct a new balanced sample of bilateral trade flows for 130 country pairs across the Americas, Asia, Europe, and Oceania for the period from 1870 to 2000 and demonstrate an overriding role for declining trade costs in the pre-World War I trade boom. In contrast, for the post-World War II trade boom we identify changes in output as the dominant force. Finally, the entirety of the interwar trade bust is explained by increases in trade costs.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2767.

in new window

Date of creation: 2009
Date of revision:
Handle: RePEc:ces:ceswps:_2767
Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  2. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  3. Hynes, William & Jacks, David S. & O'Rourke, Kevin Hjortshøj, 2009. "Commodity Market Disintegration in the Interwar Period," CEPR Discussion Papers 7189, C.E.P.R. Discussion Papers.
  4. Anne-Célia Disdier & Keith Head, 2004. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," Development Working Papers 186, Centro Studi Luca d\'Agliano, University of Milano.
  5. Carmen M. Reinhart & Kenneth S. Rogoff, 2002. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," NBER Working Papers 8963, National Bureau of Economic Research, Inc.
  6. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
  7. Novy, Dennis, 2008. "Gravity Redux : Measuring International Trade Costs with Panel Data," The Warwick Economics Research Paper Series (TWERPS) 861, University of Warwick, Department of Economics.
  8. J. Ernesto L�pez-C�rdova and Chris Meissner., 2000. "Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era," Center for International and Development Economics Research (CIDER) Working Papers C00-118, University of California at Berkeley.
  9. Jacks, David S. & Meissner, Christopher M. & Novy, Dennis, 2010. "Trade costs in the first wave of globalization," Explorations in Economic History, Elsevier, vol. 47(2), pages 127-141, April.
  10. David Atkin, 2013. "Trade, Tastes, and Nutrition in India," American Economic Review, American Economic Association, vol. 103(5), pages 1629-63, August.
  11. KrisJames Mitchener & Marc Weidenmier, 2008. "Trade and Empire," Economic Journal, Royal Economic Society, vol. 118(533), pages 1805-1834, November.
  12. Eichengreen, Barry & Irwin, Douglas A., 1995. "Trade blocs, currency blocs and the reorientation of world trade in the 1930s," Journal of International Economics, Elsevier, vol. 38(1-2), pages 1-24, February.
  13. Carrere, Celine & Schiff, Maurice, 2004. "On the geography of trade : distance is alive and well," Policy Research Working Paper Series 3206, The World Bank.
  14. Maurice Obstfeld & Kenneth Rogoff & Ben Bernanke & Kenneth Rogoff, . "The Six Major Puzzles in International Macroeconomics: Is there a Common Cause?," Working Paper 32326, Harvard University OpenScholar.
  15. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  16. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
  17. Baldwin, Richard, 2007. "Trade Effects of the Euro: a Comparison of Estimators," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 780-818.
  18. Michael A. Clemens & Jeffrey G. Williamson, 2001. "A Tariff-Growth Paradox? Protection's Impact the World Around 1875-1997," NBER Working Papers 8459, National Bureau of Economic Research, Inc.
  19. Olivier Accominotti & Marc Flandreau, 2006. "Does Bilateralism Promote Trade? Nineteenth Century Liberalization Revisited," Working Papers hal-01065617, HAL.
  20. Jakob B. Madsen, 2001. "Trade Barriers and the Collapse of World Trade During the Great Depression," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 848-868, April.
  21. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d\'Agliano, University of Milano.
  22. Jay C. Shambaugh, 2004. "The Effect of Fixed Exchange Rates on Monetary Policy," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 300-351, February.
  23. Deardorff, A.V., 1995. "Determinants of Bilateral Trade : Does Gravity Work in a Neoclassical World?," Papers 95-05, Michigan - Center for Research on Economic & Social Theory.
  24. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
  25. Rubinstein, Yona & Helpman, Elhanan & Melitz, Marc, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," Scholarly Articles 3228230, Harvard University Department of Economics.
  26. Keith Head & Thierry Mayer & John Ries, 2008. "The erosion of colonial trade linkages after independence," Working Papers hal-01066116, HAL.
  27. Manova, Kalina, 2008. "Credit constraints, equity market liberalizations and international trade," Journal of International Economics, Elsevier, vol. 76(1), pages 33-47, September.
  28. Antoni Estevadeordal & Brian Frantz & Alan M. Taylor, 2003. "The Rise And Fall Of World Trade, 1870-1939," The Quarterly Journal of Economics, MIT Press, vol. 118(2), pages 359-407, May.
  29. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  30. Robert C. Feenstra & James R. Markusen & Andrew K. Rose, 2001. "Using the gravity equation to differentiate among alternative theories of trade," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 430-447, May.
  31. John Whalley & Xian Xin, 2007. "Regionalization, Changes in Home Bias, and the Growth of World Trade," NBER Working Papers 13023, National Bureau of Economic Research, Inc.
  32. David S Jacks & Krishna Pendakur, 2010. "Global Trade and the Maritime Transport Revolution," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 745-755, November.
  33. Christopher Meissner & Nienke Oomes, 2006. "Why Do Countries Peg the Way They Peg? The Determinants of Anchor Currency Choice," WEF Working Papers 0009, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  34. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
  35. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
  36. Jeffrey G. Williamson, 2006. "Globalization and the Poor Periphery before 1950," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232502, June.
  37. repec:inr:wpaper:21709 is not listed on IDEAS
  38. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
  39. 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.
  40. Shang-Jin Wei, 1996. "Intra-National versus International Trade: How Stubborn are Nations in Global Integration?," NBER Working Papers 5531, National Bureau of Economic Research, Inc.
  41. Brown, John C., 1995. "Imperfect Competition and Anglo-German Trade Rivalry: Markets for Cotton Textiles before 1914," The Journal of Economic History, Cambridge University Press, vol. 55(03), pages 494-527, September.
  42. Robert Shimer, 2009. "Convergence in Macroeconomics: The Labor Wedge," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 280-97, January.
  43. 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.
  44. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
  45. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  46. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
  47. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  48. Temin, Peter, 1997. "Two Views of the British Industrial Revolution," The Journal of Economic History, Cambridge University Press, vol. 57(01), pages 63-82, March.
  49. Chernyshoff, Natalia & Jacks, David S. & Taylor, Alan M., 2009. "Stuck on gold: Real exchange rate volatility and the rise and fall of the gold standard, 1875-1939," Journal of International Economics, Elsevier, vol. 77(2), pages 195-205, April.
  50. Irarrazabal, Alfonso & Moxnes, Andreas & Opromolla, Luca David, 2010. "The Tip of the Iceberg: Modeling Trade Costs and Implications for Intra-Industry Reallocation," CEPR Discussion Papers 7685, C.E.P.R. Discussion Papers.
  51. Kris James Mitchener & Marc Weidenmier, 2008. "Trade and Empire," NBER Working Papers 13765, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2767. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.