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Comment: Inferring Trade Costs from Trade Booms and Trade Busts

Author

Listed:
  • Guillaume Corlay

    (ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique)

  • Stéphane Dupraz

    (Columbia University [New York])

  • Claire Labonne

    (ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique)

  • Anne Muller

    (ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique)

  • Céline Antonin

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Guillaume Daudin

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

Jacks et al. (2011) offer an alternative to price gaps to quantify trade costs. Implementing a method which consists in deducing international trade costs from trade flows, they argue that the reduction in trade costs was the main driving force of trade growth during the first globalization (1870-1913), whereas economic expansion was the main driving force during the second globalization (1950-2000). We argue that this important result is driven by the use of an ad hoc aggregation method. What Jacks et al. (2011) capture is the difference in the relative starting trade of dyads experiencing faster trade growth in the first and second globalization. More generally, we cast doubts on the possibility to reach conclusions of such nature with a method that infers trade costs from trade flows, and then uses these costs to explain trade flows. We argue that it can only rephrase the information already contained in openess ratios.

Suggested Citation

  • Guillaume Corlay & Stéphane Dupraz & Claire Labonne & Anne Muller & Céline Antonin & Guillaume Daudin, 2016. "Comment: Inferring Trade Costs from Trade Booms and Trade Busts," SciencePo Working papers Main hal-03602941, HAL.
  • Handle: RePEc:hal:spmain:hal-03602941
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-03602941
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    References listed on IDEAS

    as
    1. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, January.
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    Cited by:

    1. Saifullah Khan & Adnan Shoaib, 2024. "Firm value adjustment speed through financial friction in the presence of earnings management and productivity growth: evidence from emerging economies," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-17, December.

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    More about this item

    Keywords

    Trade costs; Globalization; Gravity model; Aggregation; Structure effect;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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