Work

On the measurement of trade costs: direct vs. indirect approaches to quantifying standards and technical regulations

Year: 2012

Type: article

Abstract: In this article, we review the literature on the measurement of trade costs in international trade with a special emphasis on non-tariff measures and in particular on standards and technical regulations. We distinguish ‘direct’ from ‘indirect’ approaches. The direct approach collects observable data or proxy variables on trade cost components which are then typically used as regressors in a gravity equation of trade. Instead, the indirect approach infers the extent of trade impediments from trade flows. It compares actual trade flows to the trade flows predicted by a hypothetical frictionless benchmark scenario based on a micro-founded trade model, attributing the deviation of actual from predicted trade flows to trade frictions. We argue that economists and policy-makers can gain useful insights from both approaches.

Source: World Trade Review

DOI: 10.1017/s1474745612000183

Authors: NATALIE CHEN, DENNIS NOVY

Institutions: University of Warwick, Centre for Economic Policy Research

Language: English

Topic: Global trade and economics

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: London School of Economics and Political Science, University of Warwick, Economic and Social Research Council

Awards: G415511948, G8486141788