The Determinants of Trade Costs: A Random Coefficients Approach

Arbeitspapier

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.).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 4859

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Other ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Trade: Forecasting and Simulation
• Subject: bilateral trade flows ; gravity equation ; random coefficients model ; trade costs

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Egger, Peter ; Prusa, Jan
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/102136
• Last update: 10.03.2025, 11:44 AM CET