Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/102136
Authors: 
Egger, Peter
Prusa, Jan
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4859
Abstract: 
This paper assesses whether the sensitivity of bilateral trade volumes to various trade cost factors is constant or varies across countries. It utilizes a random coeffcients model and analyses a cross-sectional sample of bilateral trade data for 96 countries in 2005. We expect the elasticity of trade to vary particularly with bilateral distance and bilateral tariffs due to measurement error about these factors. Indeed, the variability of coefficients is significant for these trade cost measures. The results indicate that the elasticity of trade with respect to tariffs in different countries varies relatively more than that with respect to distance. This is consistent with there being a host of sources of measurement error about bilateral tariffs (due to strategic or non-strategic misreporting; the potential inappropriateness of the weighting of disaggregated tariffs; etc.).
Subjects: 
bilateral trade flows
gravity equation
random coefficients model
trade costs
JEL: 
C29
F12
F17
Document Type: 
Working Paper

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