Do What You Know and Leave the Rest to the Experts: Quantifying the Gains from Efficient Trade

Mario Larch, Philipp Meinen, Arne J. Nagengast and Yoto V. Yotov

No 11942, CESifo Working Paper Series from CESifo

Abstract: We develop and test a theory of efficient international trade. Efficiency gains arise through lower trade costs faced by ‘trade specialists’, whose superiority over ‘common traders’ manifests itself through lower trade costs. To test our theory, we construct and deploy a novel dataset based on firm-level merchanting data. Our estimates reveal that, on average, the trade costs for the ‘trade specialists’ are about four times lower than for non-specialists. The corresponding welfare effects from globally efficient trade amount to a remarkable gain of 80%, on average, which sends an encouraging message for the potential gains from trade that are missing in the existing literature.

Keywords: efficiency; international trade; trade costs; gains from trade (search for similar items in EconPapers)
JEL-codes: D60 D61 F10 F12 F14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11942

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