Administrative Barriers and the Lumpiness of Trade

Cecília Hornok and Miklós Koren

No 2012_6, CEU Working Papers from Department of Economics, Central European University

Abstract: We document that administrative trade costs of per shipment nature (documentation, customs clearance and inspection) lead to less frequent and larger-sized shipments, i.e., more lumpiness, in international trade. We build a model where consumers have heterogeneous preferences for the arrival time of a non-storable product and firms compete by selecting the time of their shipment. Per shipment costs reduce shipment frequency, increase the shipment size and the product price and lead to welfare losses. We provide empirical evidence for these effects on detailed export data from the US and Spain. We find that US and Spanish exporters send fewer and larger shipments to countries with higher administrative barriers. However, we find no robust evidence that such destination would command higher prices.

Date: 2011-09-01, Revised 2011-09-01
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