De Bonus Vetus OLS: Approximating the international trade-cost effects of red tape(2009)
AbstractWe apply the Baier & Bergstrand Taylor Approximation of multilateral resistance terms to analyse the effects of export red tape on exports. Our variable of interest is the documents/signatures required for exports. Being a country-specific variable, it provides an ideal candidate for employment of the approximation instead of alternative methods like fixed effects. We derive a specification that gives a consistent estimate of the gravity model parameters and an isomorphic specification yielding the average comparative static effect, which is typically a small fraction but is positively related with country size. Our theoretical results are illustrated with monte carlo simulations and supported by the data. Estimates suggest 1 extra signature leads to 7% lower exports on average. However, most countries are much smaller than average, so the median effect is only 0.5%.
- Multilateral Resistance,
Citation InformationAlberto Behar. "De Bonus Vetus OLS: Approximating the international trade-cost effects of red tape" (2009)
Available at: http://works.bepress.com/alberto_behar/11/