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Market entry and trade weighted import costs

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  • Benjamin Bridgman

Abstract

Trade weighting is a common method of aggregating trade frictions. It will understate changes in these costs when there are non ad valorem trade costs and quality differences. Newly traded goods enter at higher trade costs than previously traded ones. Lower import costs shift trade to lowquality goods with higher measured trade costs. These effects are quantitatively important. U.S. import costs fall more than twice as fast as trade weighted measures from 1974 to 2004 after the impact of shifting quality and newly traded goods is accounted for. Empirical estimates that use trade weighting will underestimate the welfare impact of trade costs.

Suggested Citation

  • Benjamin Bridgman, 2013. "Market entry and trade weighted import costs," Canadian Journal of Economics, Canadian Economics Association, vol. 46(3), pages 982-1013, August.
    • Handle: RePEc:cje:issued:v:46:y:2013:i:3:p:982-1013
    DOI: 10.1111/caje.12044
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    3. Chin‐Ho Lin, 2020. "Impact of tariff rates on the probability of trade relationship survival: Evidence from ASEAN+6 manufactured goods," Pacific Economic Review, Wiley Blackwell, vol. 25(4), pages 457-474, October.

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