International Trade and Income Differences

Michael Waugh

American Economic Review, 2010, vol. 100, issue 5, 2093-2124

Abstract: I develop a novel view of the trade frictions between rich and poor countries by arguing that to reconcile bilateral trade volumes and price data within a standard gravity model, the trade frictions between rich and poor countries must be systematically asymmetric, with poor countries facing higher costs to export relative to rich countries. I provide a method to model these asymmetries and demonstrate the merits of my approach relative to alternatives in the trade literature. I then argue that these trade frictions are quantitatively important to understanding the large differences in standards of living and total factor productivity across countries. (JEL F11, F13, F14, O19 )

Date: 2010
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Citations: View citations in EconPapers (230)

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Working Paper: International trade and income differences (2009)
Working Paper: International Trade and Income Differences (2007)
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