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Gravity redux: measuring international trade costs with panel data

Dennis Novy ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Barriers to international trade are known to be large but because of 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 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)
Date: 2013-01
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Published in Economic Inquiry, January, 2013, 51(1), pp. 101-121. ISSN: 0095-2583

Downloads: (external link)
http://eprints.lse.ac.uk/59308/ Open access version. (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 (2012) 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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