Why do trade costs vary?

Pomfret, Richard; Sourdin, Patricia

doi:10.1007/s10290-010-0072-8

Cited by 24 publications

(23 citation statements)

References 35 publications

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“…Also in the presence of corruption, which is a severe problem in most of the countries in Southern Africa, exporters prefer air transport in order to minimize costs and delays within the exporting country. Especially for institution-sensitive goods, corruption creates uncertainty about timeliness of delivery (Levchenko 2007;Pomfret and Sourdin 2010). These reasons rather strengthen our hypothesis that air transport tends to be a valuable option in Southern Africa.…”

Section: Limitationssupporting

confidence: 62%

“…Ranjan and Lee (2007) find that the trade of differentiated and complex products is more affected by institutional quality. Seaport efficiency also depends on organized crime and corruption which increase transport costs (Anderson and Marcouiller 2002) and create uncertainty about timeliness of delivery so that exporters may prefer air-transport in order to minimize costs and delays (Pomfret and Sourdin 2010). The average South African firm uses about 6 per cent of their overall management time capacity in negotiations with South African government officials (Hallward-Driemeier et al 2010).…”

Section: Literature Reviewmentioning

confidence: 99%

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Air Cargo beyond Trade Barriers in Africa

Dettmer

Freytag

Draper

2014

JEI

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We develop a methodology based on two important criteria -sensitivity in delivery time and value-to-weight ratio -to classify air cargo products. The classification is applied to evaluate the trade integration in Southern Africa since air cargo is a valuable option to overcome trade barriers associated with poor land transport infrastructure and corruption. We find that South Africa's exports to industrialized countries consist of precious products such as diamonds and gold. These products tend to be transported in the hand baggage of a security personnel as they leave the loading weight of an average airplane almost unaffected. When correcting African trade for these 'invisible outliers' in the loading freight, we find that African trade integration including Southern Africa is based upon a comparatively higher share of air cargo relevant products than Southern Africa's trade with industrialized and emerging economies. A more liberal market for air cargo services can reduce transport costs and will allow the continent to integrate even further.JEL Classifications: F10, F14, F15, L93

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Section: Limitationssupporting

confidence: 62%

Section: Literature Reviewmentioning

confidence: 99%

Air Cargo beyond Trade Barriers in Africa

Dettmer

Freytag

Draper

2014

JEI

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“…among high‐income countries mineral exporters Canada and Australia have the highest trade costs). Pomfret and Sourdin (2010b) find that although distance and commodity characteristics are significant determinants of trade costs, a large unexplained variation remains after these have been controlled for. Their analysis suggests that poor institutions increase trade costs, but that the pattern of increases is commodity specific and the results are stronger for air transport, which is consistent with the hypothesis that time‐sensitive goods are more responsive to high trade costs 11 .…”

Section: How High Are Trade Costs?mentioning

confidence: 86%

Measuring International Trade Costs

Sourdin

Pomfret

2012

World Economy

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The costs of international trade have become an increasingly important item in trade negotiations (under the heading ‘trade facilitation’) and element of trade theory, but definition and measurement of trade costs remain in their infancy. This paper argues that the most conceptually appropriate measure is the gap between cost‐insurance‐freight (cif) and free‐on‐board (fob) values of traded goods, but that this must be measured on a consistent volume of trade. Such data are only available for a few countries. We calculate cif–fob gap values for the three largest trading nations that report such data (Australia, Brazil and the USA). These values provide plausible estimates of ad valorem trade costs for the three importing countries and for all countries’ exports. The estimates indicate that although trade costs have fallen over the last two decades, average trade costs now exceed the average tariff rate on imports into the USA and Australia. Country rankings by the cif–fob gap values differ significantly from those by commonly used proxies for trade costs, such as the indicators of time and cost in the World Bank’s Doing Business database, and analysis based on such proxies is likely to produce misleading results.

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“…The relationship between integrity and trade has largely been examined empirically through the trade gravity model 7 , building on work exploring the impact of the quality of institutions on international trade (Anderson and Marcouiller, 2002;Levchenko, 2007). By considering gross trade flows as a function of various trade costsincluding indicators assessing the extent of good governance or perception measures of corruptiona wide range of studies shows that corruption is detrimental to international trade, lending support to the "sand in the wheels" hypothesis (including Pomfret and Sourdin, 2010;Masila and Sigue, 2010;De Jong and Bogmans, 2011;Thede and Gustafson, 2012;Gil-Pareja et al, 2017). In particular, Thede and Gustafson (2012) show that the different characteristics of corruption can influence the degree to which it affects international trade; that is: the significance of corrupt conduct (if the corruption is severe it can limit or even prevent transactions); its prevalence (which increases the costs of searching for an honest partner); its function (obstruction of market competition) and its predictability (the more predictable it is, the lower the costs).…”

Section: Existing Empirical Evidence On the International Trade Integmentioning

confidence: 99%