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Title:Gravity redux: Measuring international trade costs with panel data PDF Logo
Authors:Novy, Dennis
Issue Date:2011
Series/Report no.:CESifo working paper: Trade Policy 3616
Abstract:Barriers to international trade are known to be large but due to data limitations it is hard to measure them directly for a large number of countries over many years. To address this problem I derive a micro-founded measure of bilateral trade costs that indirectly infers trade frictions from observable trade data. I show that this trade cost measure is consistent with a broad range of leading trade theories including Ricardian and heterogeneous firms models. In an application I show that U.S. trade costs with major trading partners declined on average by about 40 percent between 1970 and 2000, with Mexico and Canada experiencing the biggest reductions.
Subjects:trade costs
gravity
multilateral resistance
Ricardian trade
heterogeneous firms
JEL:F10
F15
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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