Comment: Inferring Trade Costs from Trade Booms and Trade Busts
Jacks et al. (2011) offer an alternative to price gaps to quantify trade costs. Implementing a method which consists in deducing international trade costs from trade flows, they argue that the reduction in trade costs was the main driving force of trade growth during the first globalization (1870-1913), whereas economic expansion was the main driving force during the second globalization (1950-2000). We argue that this important result is driven by the use of an ad hoc aggregation method. What Jacks et al. (2011) capture is the difference in the relative starting trade of dyads experiencing faster trade growth in the first and second globalization. More generally, we cast doubts on the possibility to reach conclusions of such nature with a method that infers trade costs from trade flows, and then uses these costs to explain trade flows. We argue that it can only rephrase the information already contained in openness ratios.
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- 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.
- Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, 01.
- Dennis Novy, 2012. "Gravity Redux: Measuring International Trade Costs with Panel Data," CEP Discussion Papers dp1114, Centre for Economic Performance, LSE.
- Dennis Novy, 2011. "Gravity Redux: Measuring International Trade Costs with Panel Data," CESifo Working Paper Series 3616, CESifo Group Munich.
- Dennis Novy, 2013. "Gravity redux: measuring international trade costs with panel data," LSE Research Online Documents on Economics 59308, London School of Economics and Political Science, LSE Library.
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