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Trade costs in the developing world : 1995 - 2010

  • Arvis, Jean-François
  • Duval, Yann
  • Shepherd, Ben
  • Utoktham,Chorthip

The authors use newly collected data on trade and production in 178 countries to infer estimates of trade costs in agriculture and manufactured goods for the 1995-2010 period. The data show that trade costs are strongly declining in per capita income. Moreover, the rate of change of trade costs is largely unfavorable to the developing world: trade costs are falling noticeably faster in developed countries than in developing ones, which serves to increase the relative isolation of the latter. In particular, Sub-Saharan African countries and low-income countries remain subject to very high levels of trade costs. In terms of policy implications, the analysis finds that maritime transport connectivity and logistics performance are very important determinants of bilateral trade costs: in some specifications, their combined effect is comparable to that of geographical distance. Traditional and non-traditional trade policies more generally, including market entry barriers and regional integration agreements, play a significant role in shaping the trade costs landscape.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6309.

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Date of creation: 01 Jan 2013
Date of revision:
Handle: RePEc:wbk:wbrwps:6309
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  1. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  2. Arvis, Jean-François & Shepherd, Ben, 2011. "The air connectivity index : measuring integration in the global air transport network," Policy Research Working Paper Series 5722, The World Bank.
  3. Dennis Novy, 2012. "Gravity Redux: Measuring International Trade Costs with Panel Data," CEP Discussion Papers dp1114, Centre for Economic Performance, LSE.
  4. Miroudot, Sébastien & Sauvage, Jehan & Shepherd, Ben, 2013. "Measuring the cost of international trade in services," World Trade Review, Cambridge University Press, vol. 12(04), pages 719-735, October.
  5. Borchert, Ingo & Gootiiz, Batshur & Grover, Arti & Mattoo, Aaditya, 2012. "Landlocked or policy locked ? how services trade protection deepens economic isolation," Policy Research Working Paper Series 5942, The World Bank.
  6. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2007. "Estimating Trade Flows: Trading Partners and Trading Volumes," NBER Working Papers 12927, National Bureau of Economic Research, Inc.
  7. Przemyslaw Kowalski & Ben Shepherd, 2006. "South-South Trade In Goods," OECD Trade Policy Papers 40, OECD Publishing.
  8. Jean-Fran�ois Arvis & Ben Shepherd, 2013. "The Poisson quasi-maximum likelihood estimator: a solution to the ‘adding up’ problem in gravity models," Applied Economics Letters, Taylor & Francis Journals, vol. 20(6), pages 515-519, April.
  9. repec:oup:qjecon:v:123:y:2008:i:2:p:441-487 is not listed on IDEAS
  10. de Sousa, José, 2012. "The currency union effect on trade is decreasing over time," Economics Letters, Elsevier, vol. 117(3), pages 917-920.
  11. Chen, Natalie & Novy, Dennis, 2011. "Gravity, trade integration, and heterogeneity across industries," Journal of International Economics, Elsevier, vol. 85(2), pages 206-221.
  12. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-21, September.
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