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MEASURING TRADE COSTS FROM RELATIVE PRICES: THE ROLE OF LOCATION AND GOODS CHARACTERISTICS

School of Economics, Chonnam National University, 77 Yongbong-ro, Buk-gu, Gwangju, Republic of Korea 500-757, Republic of Korea

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and

INKOO LEE

Department of International Trade, Soongsil University, 369 Sangdo-ro, Dongjak-gu Seoul, Republic of Korea 156-743, Republic of Korea

Corresponding author.

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https://doi.org/10.1142/S0217590814500416Cited by:0 (Source: Crossref)

Abstract

This paper estimates the trade costs from international relative prices, and studies the economic determinants of implied trade costs. We find that the magnitude of trade costs depends on the characteristics of both the type of good and set of locations under examination. In particular, it is found that higher non-traded input share and trade barriers, and lower tradability of goods lead to a larger trade cost, as does a lower proximity of geographic distance between locations.

Keywords:

JEL: F30, C20

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