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Gravity channels in trade.
- Source :
-
Journal of International Trade & Economic Development . Feb2023, Vol. 32 Issue 1, p37-65. 29p. 2 Charts, 8 Graphs. - Publication Year :
- 2023
-
Abstract
- Gravity variables such as distance, adjacency, colony, free trade agreements or language are used to capture the effects of trade costs in empirical studies. By using actual data on trade costs, this paper decomposes the overall effects of such variables on trade into those through three gravity channels: duties/tariffs (DC), transportation-costs (TC), and dyadic-preferences (PC). As opposed to the existing literature where gravity variables act like supply shifters (through DC and TC), this paper empirically shows that they act like demand shifters (through PC). Regarding policy, it is implied that welfare-improving globalization cannot be achieved only through reductions in direct costs such as duties/tariffs or transportation costs; it is rather the globalization itself that should be promoted in order to shift the preferences of destination countries toward international products and thus reduce indirect trade costs. The results are further connected to several existing discussions in the literature, such as welfare gains from trade and the distance puzzle. [ABSTRACT FROM AUTHOR]
- Subjects :
- *GRAVITY
*LINGUA francas
*COMMERCIAL treaties
*FREE trade
*COST control
Subjects
Details
- Language :
- English
- ISSN :
- 09638199
- Volume :
- 32
- Issue :
- 1
- Database :
- Academic Search Index
- Journal :
- Journal of International Trade & Economic Development
- Publication Type :
- Academic Journal
- Accession number :
- 161081999
- Full Text :
- https://doi.org/10.1080/09638199.2022.2073604