Trade Costs and Trade Composition

28 Pages Posted: 19 Sep 2011

See all articles by Danny McGowan

Danny McGowan

University of Nottingham

Chris Milner

University of Nottingham - School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2011

Abstract

Do trade costs have consequences other than for the volume of international trade? In this paper we investigate whether countries’ trade costs act like other national endowments by affecting the composition of countries’ exports. Using an econometric approach that controls for endogeneity by accounting for potentially relevant omitted variables, we find strong evidence for a sample of 37 industrialised and transition countries that national trade costs systematically affect the composition of trade and can be viewed therefore as a source of comparative advantage. Industries located in countries with low trade costs capture significantly higher shares of world exports, where this effect is stronger in trade cost intensive industries.

Keywords: Trade costs, comparative advantage, endowments, exports

JEL Classification: F11, F14

Suggested Citation

McGowan, Danny and Milner, Chris, Trade Costs and Trade Composition (June 1, 2011). Available at SSRN: https://ssrn.com/abstract=1930253 or http://dx.doi.org/10.2139/ssrn.1930253

Danny McGowan

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Chris Milner (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

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