How do trade costs affect international trade? This paper offers a new approach. We rely on a flexible gravity equation that predicts variable trade cost elasticities, both across and within country pairs. We apply this framework to the effect of currency unions on international trade. While we...

This study provides a decomposition of the WTO Global Trade Costs Index into five policy-relevant components: transport and travel costs; information and transaction costs; ICT connectedness; trade policy and regulatorydifferences; and governance quality. The WTO Global Trade CostsIndex is based...

To estimate correctly the effect of variable trade costs on firms’ exports, the gravity equation should control for the number of firms that participate in foreign markets. Due to the absence of these data, previous studies control for this omitted variable using econometric strategies that...

This volume was prepared by Benedikt Heid while he was working at the ifo Institute and the University of Bayreuth. It was completed in December 2013 and accepted as a doctoral thesis by the Department of Economics at the Ludwig-Maximilians-Universität München. It includes six self-contained...

Using a novel common econometric specification, we examine the measurement of three important effects in international trade that historically have been addressed largely separately: the (partial) effects on trade of economic integration agreements, national borders, and bilateral distance....

Was the collapse of world trade between 1928 and 1937 caused by higher transport costs, increased protectionism or the collapse of the gold standard? Using recent advances in the estimation of gravity equations, I examine the partial and general equilibrium effects of bilateral distance,...

This paper derives a micro-founded gravity equation in general equilibrium based on a translog demand system that allows for endogenous markups and rich substitution patterns across goods. In contrast to standard CES-based gravity equations, trade is more sensitive to trade costs if the...

Many studies have found that international borders represent large barriers to trade. But how do international borders compare to domestic border barriers? We investigate international and domestic border barriers in a unified framework. We consider a unique data set of exports from individual...