Publication detail

The determinants of trade costs: a random coefficient approach

Author(s): Jan Průša M.Phil. (Cantab), Ph.D., Egger, Peter
Type: Articles in journals with impact factor
Year: 2015
Number: 0
ISSN / ISBN: 1435-8921
Published in: Empirical Economics
Publishing place:
Keywords: bilateral trade flows; gravity equation; random coefficient model; trade costs
JEL codes: C29; F12; F17
Suggested Citation:
Grants: GAČR č. P402/12/0982: Trade Flows in Times of Economic Boom and Slump: Modifying the Gravity Model for Country, Time and Product-Specific Decision-Making
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 coefficient model and analyzes 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 mis-reporting; the potential inappropriateness of the weighting of disaggregated tariffs; etc.).
March 2021




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