Information Matters: A Theoretical Comparison of Some Cross-Border Trade Barriers

Chris M. Wilson

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: There is widespread evidence that geographical borders reduce trade. This paper presents a theoretical model capable of providing a succinct comparison of three broad forms of trade barriers involving i) trade costs, ii) localized tastes, and iii) information frictions. Despite being traditionally under-researched, it provides the stark finding that information frictions often provide the relatively more powerful marginal effect in reducing cross-border trade, and associated levels of welfare. This result remains robust under a number of extensions that further document the roles of product differentiation and alternative forms of trade costs.

Keywords: Information Frictions; Search Costs; Trade Costs; Localized Tastes; Product Differentiation (search for similar items in EconPapers)
JEL-codes: F10 L13 (search for similar items in EconPapers)
Date: 2016-04-11
New Economics Papers: this item is included in nep-cse, nep-int and nep-pr~
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:130180

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