The tip of the iceberg: a quantitative framework for estimating trade costs
Journal article, Peer reviewed
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- Scientific articles 
OriginalversjonReview of Economics and Statistics, 97(2015)4:777-792 10.1162/REST_a_00517
Casual empiricism suggests that additive trade costs, such as quotas, per-unit tariffs, and, in part, transportation costs, are prevalent. In spite of this, we have no broad and systematic evidence of the magnitude of these costs. We develop a new empirical framework for estimating additive trade costs from standard firmlevel trade data. Our results suggest that additive barriers are on average 14 percent, expressed relative to the median price. The point estimates are strongly correlated with common proxies for trade costs. Using our micro estimates, we show that a reduction in additive trade costs produces much higher welfare gains and growth in trade flows than a similar reduction in multiplicative trade costs.
This is the accepted and refereed manuscript of the article.