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Unlocking New Methods to Estimate Country-specific Trade Costs and Trade Elasticitie

Author

Listed:
  • Rebecca Freeman

    (Bank of England)

  • Mario Larch

    (University of Bayreuth)

  • Angelos Theodorakopoulos

    (University of Oxford)

  • Yoto Yotov

    (Drexel University)

Abstract

We propose new methods to identify the full impact of country-specific characteristics on bilateral trade flows within the framework of “the new quantitative trade model.” We complement theory with a simple two-stage estimating procedure, and offer a proof of concept by quantifying the impact of country-specific R&D expenditure on trade. Results suggest a positive relationship overall, but a larger impact on international (versus domestic) trade. Further, our methodology allows us to recover trade elasticity estimates without the need for price/tariff data. Bringing this to the sectoral level, we obtain estimates of the trade elasticity for manufacturing, services, and tradable versus non-tradable sectors

Suggested Citation

  • Rebecca Freeman & Mario Larch & Angelos Theodorakopoulos & Yoto Yotov, 2021. "Unlocking New Methods to Estimate Country-specific Trade Costs and Trade Elasticitie," School of Economics Working Paper Series 2021-17, LeBow College of Business, Drexel University.
    • Handle: RePEc:ris:drxlwp:2021_017
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    Cited by:

    1. Lamonaca, Emilia & Bozzola, Martina & Santeramo, Fabio Gaetano, 2024. "Climate distance and bilateral trade," Economics Letters, Elsevier, vol. 237(C).
    2. Görg, Holger & Jacobs, Anna & Meuchelböck, Saskia, 2024. "Who is to suffer? Quantifying the impact of sanctions on German firms," Journal of Economic Behavior & Organization, Elsevier, vol. 228(C).
    3. Noemie Lisack & Simon Lloyd & Rana Sajedi, 2022. "Aggregation across each nation: aggregator choice and macroeconomic dynamics," Bank of England working papers 982, Bank of England.
    4. Tibor Besedeš & Stefan Goldbach & Volker Nitsch, 2024. "Smart or smash? The effect of financial sanctions on trade in goods and services," Review of International Economics, Wiley Blackwell, vol. 32(1), pages 223-251, February.
    5. Swati Dhingra & Rebecca Freeman & Hanwei Huang, 2023. "The Impact of Non‐tariff Barriers on Trade and Welfare," Economica, London School of Economics and Political Science, vol. 90(357), pages 140-177, January.
    6. Javier Flórez Mendoza & Oliver Reiter & Robert Stehrer, 2024. "EU carbon border tax: General equilibrium effects on income and emissions," wiiw Working Papers 254, The Vienna Institute for International Economic Studies, wiiw.
    7. Ina C. Jäkel & Søren Østervig & Erdal Yalcin, 2024. "The effects of heterogeneous sanctions on exporting firms: Evidence from Denmark," Review of International Economics, Wiley Blackwell, vol. 32(1), pages 161-189, February.

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    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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