Administrative barriers to trade

Cecília Hornok, Miklós Koren*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    Abstract (may include machine translation)

    We build a model of administrative barriers to trade to understand how they affect trade volumes, shipping decisions and welfare. Because administrative costs are incurred with every shipment, exporters have to decide how to break up total trade into individual shipments. Consumers value frequent shipments, because they enable them to consume close to their preferred dates. Hence per-shipment costs create a welfare loss.We derive a gravity equation in our model and show that administrative costs can be expressed as bilateral ad-valorem trade costs. We estimate the ad-valorem equivalent in Spanish shipment-level export data and find it to be large. A 50% reduction in per-shipment costs is equivalent to a 9 percentage point reduction in tariffs. Our model and estimates help explain why policy makers emphasize trade facilitation and why trade within customs unions is larger than trade within free trade areas.

    Original languageEnglish
    Pages (from-to)S110-S122
    JournalJournal of International Economics
    Volume96
    Issue numberS1
    DOIs
    StatePublished - 1 Jul 2015

    Keywords

    • Administrative barriers
    • Customs union
    • Gravity equation
    • Trade facilitation

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