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Trade Costs and Trade Composition

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  • Danny McGowan
  • Chris Milner

Abstract

Do trade costs have consequences other than on the volume of international trade? In this paper we investigate whether countries’ trade costs act like other national endowments by affecting the composition of countries’ exports. Using an econometric approach that controls for endogeneity by accounting for potentially relevant omitted variables we find strong evidence for a sample of 37 industrialised and transition countries that national trade costs systematically affect the composition of trade and can be viewed therefore as a source of comparative advantage. Industries located in countries with low trade costs capture significantly higher shares of world exports where this effect is stronger in trade cost intensive industries.

Suggested Citation

  • Danny McGowan & Chris Milner, 2011. "Trade Costs and Trade Composition," Discussion Papers 11/11, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:11/11
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    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2011/11-11.pdf
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    3. Christian Gormsen, 2012. "The Declining Barriers to Foreign Direct Investments and How to See Them," Post-Print halshs-00676508, HAL.
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    6. Koch, Michael & Egger, Hartmut, 2013. "Trade and the Firm-Internal Allocation of Workers to Tasks," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79841, Verein für Socialpolitik / German Economic Association.
    7. Christian Gormsen, 2012. "The Declining barriers to Foreign Direct Investments and how to see them," Documents de travail du Centre d'Economie de la Sorbonne 12015, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    8. Egger, Hartmut & Egger, Peter & Kreickemeier, Udo & Moser, Christoph, 2020. "The exporter wage premium when firms and workers are heterogeneous," European Economic Review, Elsevier, vol. 130(C).
    9. Christian Soegaard, 2011. "The Self-enforceability of Trade Agreements in the Presence of Trade Costs," Discussion Papers 11/26, University of Nottingham, GEP.
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    11. Onwuka Ifeanyi Onuka & Ozegbe Roseline Oroboghae, 2020. "African Continental Free Trade Area Agreement – Does the Facts Support the Benefits for Nigeria?," International Business Research, Canadian Center of Science and Education, vol. 13(7), pages 236-236, July.

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