International Trade and Income Differences
- (pp. 2093-2124)
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. (JEL F11, F13, F14, O19 )Citation
Waugh, Michael E. 2010. "International Trade and Income Differences." American Economic Review, 100 (5): 2093-2124. DOI: 10.1257/aer.100.5.2093Additional Materials
JEL Classification
- F11 Neoclassical Models of Trade
- F13 Trade Policy; International Trade Organizations
- F14 Country and Industry Studies of Trade
- O19 International Linkages to Development; Role of International Organizations