The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs

Alfonso Irarrazabal, Andreas Moxnes and Luca David Opromolla

No 19236, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Casual empiricism suggests that additive trade costs, such as quotas, per-unit tariffs, and, in part, transportation costs, are prevalent. In spite of this, we have no broad and systematic evidence of the magnitude of these costs. We develop a new empirical framework for estimating additive trade costs from standard firm-level trade data. Our results suggest that additive barriers are on average 14 percent, expressed relative to the median price. The point estimates are strongly correlated with common proxies for trade costs. Using our micro estimates, we show that a reduction in additive trade costs produces much higher welfare gains and growth in trade flows than a similar reduction in multiplicative trade costs.

JEL-codes: F1 F10 F14 (search for similar items in EconPapers)
Date: 2013-07
New Economics Papers: this item is included in nep-int and nep-tre
Note: ITI
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Citations: View citations in EconPapers (13)

Published as Alfonso Irarrazabal & Andreas Moxnes & Luca David Opromolla, 2015. "The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 777-792, October.

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Related works:
Working Paper: The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs (2011)
Working Paper: The Tip of the Iceberg: Modeling Trade Costs and Implications for Intra-Industry Reallocation (2010)
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