THE IMPACT OF TRADE COSTS ON EXPORTS: AN EMPIRICAL MODELLING

Studies, which have discussed some of the important issues concerning the
measurement of trade costs, have conceded that the literature is still in the
early stages of understanding and measuring what the real costs are. It is in
this context, decomposing trade costs into ‘natural’ costs, ‘behind the border’
costs, ‘explicit beyond the border’ costs, and ‘implicit beyond the border’ costs,
this paper suggests a method to measure the impacts of these components on
changes in exports between countries in the absence of complete information
on all the components of trade costs in home and partner countries. Empirical
measurement has been demonstrated using 1999 and 2004 trade data from
Pakistan. The results show that Pakistan’s export growth between 1999 and
2004 came mainly from the reduction in both ‘explicit and implicit beyond the
border’ trade costs in partner countries.