Journal of African Trade

Volume 5, Issue 1-2, December 2018, Pages 69 - 86

How well does observable trade data measure trade friction costs? Evidence from member countries within the Economic Community of West African States (ECOWAS)

Authors
Festus Ebo Turksonfeturkson@ug.edu.gh
Department of Economics, School of Social Science, College of Humanities, University of Ghana, Box LG57, Legon, Accra, Ghana
Received 13 August 2016, Revised 26 December 2017, Accepted 2 March 2018, Available Online 3 November 2018.
DOI
10.1016/j.joat.2018.03.001How to use a DOI?
Abstract

This paper is an empirical application of the micro-founded measure of trade costs by Head and Mayer (2004) and Novy (2013). The derived micro-founded measure, consistent with the Ricardian and heterogeneous firm’s models of trade, captures all trade costs components that hitherto have been impossible to include in the gravity framework because of severe data limitations and the impracticability of measuring some of the trade cost components.

Based on bilateral trade and production data from the Trade, Production, and Protection database by Nicita and Olarreaga (2007) over the period 1980–2003, the micro-founded estimate of relative bilateral trade cost measure computed for ECOWAS clearly indicates lower trade costs among member ECOWAS countries compared with that for trade with other countries from SSA. With regard to accounting for variations in the computed measure of trade costs, the estimates obtained support the literature on the contribution of trade cost proxies to trade costs. Common non-tariff trade costs proxies explain over two-thirds of the variation in the trade costs estimates obtained for trade within the ECOWAS sub-region.

This paper argues for the need for policy makers within the sub-region to identify and reduce the trade barriers associated with trading within the ECOWAS sub-region. In addition, results from this paper, that bilateral transactions in a common currency reduces trade costs, suggest that current efforts at establishing a common currency, if successful, may improve intra-ECOWAS trade.

Copyright
© 2018 Afreximbank. Production and hosting by Elsevier B.V. All rights reserved.
Open Access
This is an open access article under the CC BY-NC license (http://creativecommons.org/licences/by-nc/4.0/).

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Journal
Journal of African Trade
Volume-Issue
5 - 1-2
Pages
69 - 86
Publication Date
2018/11/03
ISSN (Online)
2214-8523
ISSN (Print)
2214-8515
DOI
10.1016/j.joat.2018.03.001How to use a DOI?
Copyright
© 2018 Afreximbank. Production and hosting by Elsevier B.V. All rights reserved.
Open Access
This is an open access article under the CC BY-NC license (http://creativecommons.org/licences/by-nc/4.0/).

Cite this article

TY  - JOUR
AU  - Festus Ebo Turkson
PY  - 2018
DA  - 2018/11/03
TI  - How well does observable trade data measure trade friction costs? Evidence from member countries within the Economic Community of West African States (ECOWAS)
JO  - Journal of African Trade
SP  - 69
EP  - 86
VL  - 5
IS  - 1-2
SN  - 2214-8523
UR  - https://doi.org/10.1016/j.joat.2018.03.001
DO  - 10.1016/j.joat.2018.03.001
ID  - Turkson2018
ER  -