NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Measuring Openness to Trade

Michael E. Waugh, B. Ravikumar

NBER Working Paper No. 22147
Issued in April 2016, Revised in July 2016
NBER Program(s):Economic Fluctuations and Growth, International Finance and Macroeconomics, International Trade and Investment

In this paper we derive a new measure of openness—trade potential index—that quantifies potential gains from trade as a simple function of data. Using a standard multicountry trade model, we measure openness by a country’s potential welfare gain from moving to a world with frictionless trade. In this model, a country’s trade potential depends on only the trade elasticity and two observable statistics: the country’s home trade share and its income level. Quantitatively, poor countries have greater potential gains from trade relative to rich countries, while their welfare costs of autarky are similar. This leads us to infer that rich countries are more open to trade. Our trade potential index correlates strongly with estimates of trade costs, while both the welfare cost of autarky and the volume of trade correlate weakly with trade costs. Thus, our measure of openness is informative about the underlying trade frictions.

download in pdf format
   (237 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w22147

Published: Michael E. Waugh & B. Ravikumar, 2016. "Measuring Openness to Trade," Journal of Economic Dynamics and Control, . citation courtesy of

Users who downloaded this paper also downloaded* these:
Limão w22138 Preferential Trade Agreements
Leamer Measures of Openness
Goldberg and Pavcnik w21957 The Effects of Trade Policy
Grossman w22070 The Purpose of Trade Agreements
Hsieh, Li, Ossa, and Yang w22069 Accounting for the New Gains from Trade Liberalization
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us