Comment: Inferring Trade Costs from Trade Booms and Trade Busts

Guillaume Corlay (1) , Stéphane Dupraz (2) , Claire Labonne (1) , Anne Muller (1) , Céline Antonin (3) , Guillaume Daudin (3)

1 ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique
2 Columbia University [New York]
3 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

Jacks et al. (2011) offer an alternative to price gaps to quantify trade costs. Implementing a method which consists in deducing international trade costs from trade flows, they argue that the reduction in trade costs was the main driving force of trade growth during the first globalization (1870-1913), whereas economic expansion was the main driving force during the second globalization (1950-2000). We argue that this important result is driven by the use of an ad hoc aggregation method. What Jacks et al. (2011) capture is the difference in the relative starting trade of dyads experiencing faster trade growth in the first and second globalization. More generally, we cast doubts on the possibility to reach conclusions of such nature with a method that infers trade costs from trade flows, and then uses these costs to explain trade flows. We argue that it can only rephrase the information already contained in openess ratios.

Mots clés: Trade costs; Globalization; Gravity model; Aggregation; Structure effect

Domaines: Economies et finances

Guillaume Corlay, Stéphane Dupraz, Claire Labonne, Anne Muller, Céline Antonin, et al.. Comment: Inferring Trade Costs from Trade Booms and Trade Busts. 2016. ⟨hal-03602941⟩