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Comment : Inferring Trade Costs from Trade Booms and Trade Busts

Listed author(s):
  • Guillaume Corlay

    (ENSAE)

  • Stéphane Dupraz

    (Colombia University)

  • Claire Labonne

    (PSE - Banque de France)

  • Anne Muller

    (ENSAE)

  • Céline Antonin

    (OFCE-Sciences Po)

  • Guillaume Daudin

    (Université Paris-Dauphine OFCE-Sciences PO)

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 hocaggregation 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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File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2016-25.pdf
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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2016-25.

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Date of creation: Jul 2016
Handle: RePEc:fce:doctra:1625
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  1. 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.
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