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Entry barriers and the extensive margin: Estimating trade restrictiveness from trade flows and lack thereof

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  • Lanz, Rainer
  • Miroudot, Sebastien
  • Nordås, Hildegunn Kyvik

Abstract

This paper provides a first attempt to estimate services trade costs directly from trade data. It builds on two recent papers, the first by Helpman, Melitz and Rubinstein (2008) (HMR), and the second by Novy (2008). Both papers provide innovative ways of assessing overall trade restrictiveness. The beauty of the HMR paper is that the only trade data needed is information on whether or not a country pair trades with each other in the sector in question. In a situation where bilateral services trade data are not as readily available as one might wish for, this seems like a great advantage. In order to check whether it is the methodology or the data that creates problems, the HMR probit methodology is applied to goods trade as well. Here the results are more plausible and it thus appears that the problem is mainly on the data side. The Novy methodology is both simple and produces plausible results. Here trade costs can be estimated based on information on two-way bilateral trade and internal trade in the sector of interest. The paper concludes that at this stage the Novy methodology can be used as a supplement to other sources of information on trade costs.

Suggested Citation

  • Lanz, Rainer & Miroudot, Sebastien & Nordås, Hildegunn Kyvik, 2009. "Entry barriers and the extensive margin: Estimating trade restrictiveness from trade flows and lack thereof," Conference papers 331843, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331843
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    References listed on IDEAS

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