Abstract
This paper demonstrates that observable trade cost measures in logs are not linearly related to the overall log trade costs nor to the conditional mean of log bilateral trade flows. This is shown using a simultaneous quantiles regression model and data on bilateral exports in 2008. This is modeled as a function of geographical, cultural, and historical observables and a host of unobservable trade cost measures in a structural model of bilateral trade. In this model, trade costs differ not only statistically but also quantitatively across the quantiles of the conditional distribution of bilateral exports. As a consequence, comparative static effects of these trade costs vary as well.
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Notes
Of the 191 parameters estimated, only two are not significantly different across all 19 quantiles.
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The authors gratefully acknowledge numerous helpful comments by a reviewer and the editor in charge on an earlier version of the manuscript. Egger acknowledges funding by the Czech Science Fund (GA ČR) through Grant Number P402/12/0982.
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Baltagi, B.H., Egger, P. Estimation of structural gravity quantile regression models. Empir Econ 50, 5–15 (2016). https://doi.org/10.1007/s00181-015-0956-5
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DOI: https://doi.org/10.1007/s00181-015-0956-5