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Gravity Redux: Measuring International Trade Costs with Panel Data

Dennis Novy ()

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Barriers to international trade are known to be large. But have they become smaller over time? Building on the gravity framework by Anderson and van Wincoop (2003), I derive an analytical solution for time-varying multilateral resistance variables that can be related to observable trade data. This solution makes it possible to infer time-varying bilateral trade costs directly from the model's gravity equation without imposing arbitrary trade cost functions. As an illustration, I show that U.S. trade costs with major trading partners declined on average by about 40 percent between 1970 and 2000, with Mexico and Canada experiencing the biggest reductions.

Keywords: Trade Costs; Gravity; Multilateral Resistance; Panel Data (search for similar items in EconPapers)
JEL-codes: F10 F15 (search for similar items in EconPapers)
Date: 2008
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https://warwick.ac.uk/fac/soc/economics/research/w ... s/2008/twerp_861.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 (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
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