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The revealed cost competitiveness of changing trade patterns: A country-sector exercise

Massimo Del Gatto

International Economics, 2018, issue 154, 3-22

Abstract: In new trade models with heterogenous firms, trade liberalization between high-cost and low-cost countries is expected, all the rest equal, to increase cost competitiveness (i.e., to decrease real marginal costs) relatively more in the former. We report evidence in favour of this prediction for a sample of countries, accounting for about 85% of world trade, from the 1980s to the 2000s. The estimation of the country-sector changes in cost competitiveness (relative to the UK) hinges on taking advantage of the observability of international trade patterns to reveal information on cross-country differences in marginal costs, hence ‘revealed’ cost competitiveness.

Keywords: Firm selection; Gravity equation; Import competition (search for similar items in EconPapers)
JEL-codes: F12 F14 F15 O47 (search for similar items in EconPapers)
Date: 2018
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