Comment: Inferring Trade Costs from Trade Booms and Trade Busts
Résumé
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.
Domaines
Economies et finances
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