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Gravity Redux: Measuring International Trade Costs with Panel Data

Dennis Novy ()

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Barriers to international trade are known to be large but due to data limitations it is hard to measure them directly for a large number of countries over many years. To address this problem I derive a micro-founded measure of bilateral trade costs that indirectly infers trade frictions from observable trade data. I show that this trade cost measure is consistent with a broad range of leading trade theories including Ricardian and heterogeneous firms models. In an application I show that U.S. trade costs with major trading partners declined on average by about 40 percent between 1970 and 2000, with Mexico and Canada experiencing the biggest reductions.

Keywords: Trade Costs; Gravity; Multilateral Resistance; Ricardian Trade; Heterogeneous Firms (search for similar items in EconPapers)
JEL-codes: F10 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2012-01
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http://cep.lse.ac.uk/pubs/download/dp1114.pdf (application/pdf)

Related works:
Journal Article: GRAVITY REDUX: MEASURING INTERNATIONAL TRADE COSTS WITH PANEL DATA (2013) Downloads
Working Paper: Gravity redux: measuring international trade costs with panel data (2013) Downloads
Working Paper: Gravity Redux: Measuring International Trade Costs with Panel Data (2011) Downloads
Working Paper: Gravity Redux: Measuring International Trade Costs with Panel Data (2011) Downloads
Working Paper: Gravity Redux: Measuring International Trade Costs with Panel Data (2008) Downloads
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