American Economic Review Vol. 100 No. 5 2010
International Trade and Income Differences
Abstract
I develop a novel view of the trade frictions between rich and poor countries by arguing that to reconcile bilateral trade volumes and price data within a standard gravity model, the trade frictions between rich and poor countries must be systematically asymmetric, with poor countries facing higher costs to export relative to rich countries. I provide a method to model these asymmetries and demonstrate the merits of my approach relative to alternatives in the trade literature. I then argue that these trade frictions are quantitatively important to understanding the large differences in standards of living and total factor productivity across countries.
- DOI
- 10.1257/aer.100.5.2093
- Volume
- 100
- Issue
- 5
- Pages
- 2093-2124
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref