Anderson, James E. - Boston College / Department of Economics - 2009
The high trade costs inferred from gravity are rarely used in thewide class of trade models. Two related problems … explain this omis-sion of a key explanatory variable. First, national seller and buyer re-sponses to trade costs depend on … their incidence rather than on the fullcost. Second, the high dimensionality of bilateral trade costs requiresaggregation …