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Geography, Search Frictions and Endogenous Trade Costs

Listed author(s):
  • Brancaccio, Giulia
  • Kalouptsidi, Myrto
  • Papageorgiou, Theodore

We leverage detailed data on vessel movements and shipping contracts to shed new light on world trade costs and trade flows. The data reveal new facts about shipping patterns, and motivate us to build a framework modeling the behavior of exporters and ships. Our framework has two novel features: (i) trade costs are endogenous and determined jointly with trade flows; as a result, they depend on the entire network of countries; (ii) search frictions between exporters and ships can limit trade. We estimate the model and recover flexibly the matching process between ships and exporters. Endogenous trade costs provide a novel link to understand trade patterns and we showcase this by considering the impact of (i) an improvement in shipping efficiency; (ii) a slow-down in China; (iii) the opening of the Northwest Passage; (iv) search frictions.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 12141.

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Date of creation: Jul 2017
Handle: RePEc:cpr:ceprdp:12141
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  1. Ricardo Reyes-Heroles, 2017. "The Role of Trade Costs in the Surge of Trade Imbalances," 2017 Meeting Papers 212, Society for Economic Dynamics.
  2. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
  3. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October.
  4. Ariel Pakes & Michael Ostrovsky & Steven Berry, 2007. "Simple estimators for the parameters of discrete dynamic games (with entry/exit examples)," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 373-399, 06.
  5. Patrick Bajari & C. Lanier Benkard, 2005. "Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1239-1276, December.
  6. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
  7. Jota Ishikawa & Nori Tarui, 2015. "Backfiring with backhaul problems: Trade and Industrial Policies with Endogenous Transport Costs," Working Papers 201514, University of Hawaii at Manoa, Department of Economics.
  8. Paul Scott & Eduardo Souza-Rodrigues & Myrto Kalouptsidi, 2016. "Identification of Counterfactuals in Dynamic Discrete Choice Models," 2016 Meeting Papers 282, Society for Economic Dynamics.
  9. Frechette, Guilaume & Lizzeri, Alessandro & Salz, Tobias, 2016. "Frictions in a Competitive, Regulated Market Evidence from Taxis," CEPR Discussion Papers 11626, C.E.P.R. Discussion Papers.
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