A Passage to India: Quantifying Internal and External Barriers to Trade

Eva Van Leemput ()

No 1185, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper quantifies the size of internal versus external trade barriers and assesses the impact on trade and welfare. I develop a quantitative multi-sector international trade model featuring nonhomothetic preferences in which states trade both domestically and internationally. I discipline the model using rich micro data on price dispersion as well as foreign and domestic trade flows at the Indian state level. I find that (1) state-based price data predict internal trade flows well; (2) internal trade barriers make up 40% of the total trade cost on average, but vary substantially by state depending on the distance to the closest port; and (3) the welfare impacts of domestic integration are substantial: reducing trade barriers across states to the U.S. level increases welfare by more (13%) than fully eliminating international import barriers (7%).

Keywords: Internal Trade Barriers; External Trade Barriers; Welfare; India (search for similar items in EconPapers)
JEL-codes: F13 F14 O18 O24 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2016-12
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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https://www.federalreserve.gov/econresdata/ifdp/2016/files/ifdp1185.pdf (application/pdf)

Related works:
Journal Article: A passage to India: Quantifying internal and external barriers to trade (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1185

DOI: 10.17016/IFDP.2016.1185

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