Is the Iceberg Melting Less Quickly? International Trade Costs after World War II

International trade costs are of vital importance because they determine trade patterns and therefore economic performance. This paper develops a new micro-founded measure of international trade costs. It is based on a multicountry general equilibrium model of trade that incorporates bilateral ìicebergî trade costs. The model results in a gravity equation from which the implied trade costs can be easily computed. The trade cost measure is intuitive, takes multilateral resistance into account and yields empirical results that are economically sensible. It is found that during the post-World War II period trade costs have declined markedly. The dispersion of trade costs across countries can best be explained by geographical and historical factors like distance and colonial linkages but also by tari§s and free trade agreements.


Issue Date:
Oct 07 2006
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/269734
Language:
English
Total Pages:
39
JEL Codes:
F1; F4




 Record created 2018-03-21, last modified 2018-03-21

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