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

Chen, Natalie and Novy, Dennis (2012) On the measurement of trade costs: direct vs. indirect approaches to quantifying standards and technical regulations. CEP Discussion Papers (CEPDP1164). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

In this article, we review the literature on the measurement of trade costs in international trade with a special emphasis on nontariff 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 policymakers can gain useful insights from both approaches.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2012 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HF Commerce
JEL classification: F - International Economics > F1 - Trade > F10 - General
F - International Economics > F1 - Trade > F15 - Economic Integration
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 07 Aug 2013 14:06
Last Modified: 20 Mar 2019 01:18
URI: http://eprints.lse.ac.uk/id/eprint/51509

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