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On the Measurement of Trade Costs: Direct vs. Indirect Approaches to Quantifying Standards and Technical Regulations

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  • Chen, Natalie
  • Novy, Dennis

Abstract

In this article, we review the literature on the measurement of trade costs in international trade with a special emphasis on nontariff measures and in particular on standards and technical regulations. We distinguish 'direct' from 'indirect' approaches. The direct approach collects observable data or proxy variables on trade cost components which are then typically used as regressors in a gravity equation of trade. Instead, the indirect approach infers the extent of trade impediments from trade flows. It compares actual trade flows to the trade flows predicted by a hypothetical frictionless benchmark scenario based on a micro-founded trade model, attributing the deviation of actual from predicted trade flows to trade frictions. We argue that economists and policymakers can gain useful insights from both approaches.

Suggested Citation

  • Chen, Natalie & Novy, Dennis, 2012. "On the Measurement of Trade Costs: Direct vs. Indirect Approaches to Quantifying Standards and Technical Regulations," CEPR Discussion Papers 8883, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8883
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    Cited by:

    1. L. De Benedictis & V. Licio & AM. Pinna, 2018. "The long-term effects of the historical Roman road network: trade costs of Italian provinces," Working Paper CRENoS 201801, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    2. Ingo Borchert & Batshur Gootiiz & Aaditya Mattoo, 2014. "Policy Barriers to International Trade in Services: Evidence from a New Database," World Bank Economic Review, World Bank Group, vol. 28(1), pages 162-188.
    3. Alessandro NICITA & Jaime DE MELO, 2018. "Non-Tariff Measures: Data and Quantitative Tools of Analysis," Working Papers P218, FERDI.
    4. Arman Mazhikeyev & T.Huw Edwards, 2013. "Central Asian Trade Relations in the Post-Soviet Era," Discussion Paper Series 2013_02, Department of Economics, Loughborough University, revised Jun 2013.
    5. Peter Egger & Michael Pfaffermayr, 2016. "A generalized spatial error components model for gravity equations," Empirical Economics, Springer, vol. 50(1), pages 177-195, February.
    6. Gabriel Felbermayr & Benedikt Heid & Mario Larch & Erdal Yalcin, 2015. "Macroeconomic potentials of transatlantic free trade: a high resolution perspective for Europe and the world," Economic Policy, CEPR;CES;MSH, vol. 30(83), pages 491-537.
    7. Gabriel Felbermayr & Benedikt Heid & Mario Larch, 2015. "TTIP: Small Gains, High Risks?," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 15(4), pages 20-30, January.
    8. Matthias Beestermöller & Anne-Célia Disdier & Lionel Gérard Fontagné, 2016. "Impact of European Food Safety Border Inspections on Agri-Food Exports: Evidence from Chinese Firms," CESifo Working Paper Series 5840, CESifo Group Munich.
    9. repec:bla:worlde:v:40:y:2017:i:10:p:2255-2276 is not listed on IDEAS
    10. Jaime De Melo & Alessandro Nicita, 2018. "Non-Tariff Measures: Data and Quantitative Tools of Analysis," Post-Print hal-01731305, HAL.
    11. Arman Mazhikeyev & T.Huw Edwards & Marian Rizov, 2014. "Openness and Isolation: the comparative trade performance of the Former Soviet Central Asian countries," Discussion Paper Series 2014_02, Department of Economics, Loughborough University, revised Feb 2014.
    12. Michida, Etsuyo & Ueki, Yasushi & Nabeshima, Kaoru, 2014. "Impact on Asian firms of product-related environmental regulations through global supply chains : a study of firms in Malaysia," IDE Discussion Papers 453, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    13. ARMAN MAZHIKEYEV & Huw Edwards, 2015. "Consequences Of Asymmetric Deeper Eurasian Economic Integration," EcoMod2015 8365, EcoMod.
    14. Stefano Bolatto, "undated". "Trade across Countries and Manufacturing Sectors with Heterogeneous Trade Elasticities," Development Working Papers 360, Centro Studi Luca d'Agliano, University of Milano.
    15. Ederington,Josh & Ruta,Michele, 2016. "Non-tariff measures and the world trading system," Policy Research Working Paper Series 7661, The World Bank.

    More about this item

    Keywords

    Gravity; Measurement; Nontariff Measures; Product Standards; Technical Barriers to Trade; Technical Regulations; Trade Costs;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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