Comparison of asymmetric trade costs: Estimated vs. recovered

Abstract

The aim of this paper is to compare trade costs which are obtained using two methods. In the first method, trade costs are recovered from bilateral trade equation, without imposing any restriction on the trade costs. In the second method, trade costs are estimated using the gravity variables. The comparison between them shows that average estimated trade costs imply higher barriers for developing countries when they are both exporting and importing compared to the developed countries. On the other hand average recovered trade costs imply higher barriers for developing countries when they are exporting and lower barriers when they are importing compared with the developed countries.