International trade and income differences

Michael Waugh

No 435, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: I develop a novel view of the trade frictions between rich and poor countries by arguing that to reconcile bilateral trade volumes and price data within a standard gravity model, the trade frictions between rich and poor countries must be systematically asymmetric, with poor countries facing higher costs to export relative to rich countries. I provide a method to model these asymmetries and demonstrate the merits of my approach relative to alternatives in the trade literature. I then argue that these trade frictions are quantitatively important to understanding the large differences in standards of living and total factor productivity across countries.

Keywords: Developing countries; Developed countries; Trade; Exports (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-dev and nep-int
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Citations: View citations in EconPapers (30)

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Related works:
Journal Article: International Trade and Income Differences (2010)
Working Paper: International Trade and Income Differences (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:435

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