Triangle inequalities in international trade: The neglected dimension

• 成果类型: Article
• 署名作者: Foellmi, Reto; Hepenstrick, Christian; Torun, David
• 署名单位: University of St Gallen; Swiss National Bank (SNB); University of California System; University of California San Diego
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2024.104018
• 发表日期: 2024
• 关键词: Trade costs; Re-routing; Triangle inequality; Exact hat algebra; welfare

摘要

Estimating trade costs is key to understanding the welfare effects of trade liberalizations. Cost minimization implies that the triangle inequality (TI) of international trade costs must hold for any three countries to avoid cross-border arbitrage. We show that re-routing opportunities might arise when trade costs change because a shipment through an intermediary becomes cheaper. The TI captures such re-routing opportunities. However, standard approaches to calculating the gains from trade liberalizations ignore this no-arbitrage condition. We outline an estimation routine that is model-consistent and respects the TI. Counterfactual exercises suggest that the welfare gains from re-routing after trade liberalizations can be substantial.