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Market entry and trade weighted import costs

Benjamin Bridgman ()

Canadian Journal of Economics, 2013, vol. 46, issue 3, 982-1013

Abstract: Trade weighting is a common method of aggregating trade frictions. It will understate changes in these costs when there are non ad valorem trade costs and quality differences. Newly traded goods enter at higher trade costs than previously traded ones. Lower import costs shift trade to lowquality goods with higher measured trade costs. These effects are quantitatively important. U.S. import costs fall more than twice as fast as trade weighted measures from 1974 to 2004 after the impact of shifting quality and newly traded goods is accounted for. Empirical estimates that use trade weighting will underestimate the welfare impact of trade costs.

JEL-codes: F1 (search for similar items in EconPapers)
Date: 2013
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Journal Article: Market entry and trade weighted import costs (2013) Downloads
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Handle: RePEc:cje:issued:v:46:y:2013:i:3:p:982-1013