Working Paper: NBER ID: w12602
Authors: David S. Jacks; Christopher M. Meissner; Dennis Novy
Abstract: What drives globalization today and in the past? We employ a new micro-founded measure of bilateral trade costs based on a standard model of trade in differentiated goods to address this question. These trade costs gauge the difference between observed bilateral trade and frictionless trade. They comprise tariffs, transportation costs and all other factors that impede international trade but which are inherently difficult to observe. Trade costs fell on average by ten to fifteen percent between 1870 and 1913. We also use this measure to decompose the growth of global trade over that period and find that roughly 44 percent of the global trade boom can be explained by reductions in trade costs; the remaining 56 percent is attributable to economic expansion.
Keywords: Trade Costs; Globalization; Economic Expansion
JEL Codes: F15; N70
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| geographic proximity (R12) | trade costs (F19) |
| trade policy (F13) | trade costs (F19) |
| transportation costs (L91) | trade costs (F19) |
| adherence to the gold standard (E42) | trade costs (F19) |
| membership in the British Empire (F36) | trade costs (F19) |
| trade costs (F19) | trade flows (F10) |
| economic expansion (F43) | trade growth (F19) |