Casual observation suggests that intra-national trade costs remain high in low- and middle-income countries. Precisely estimating them is crucial for guiding policies aimed at optimizing economic efficiency within a country's borders. This paper estimates intra-national trade costs for six low- and middle-income countries in Africa and Eastern Europe: Kenya, Madagascar, Nigeria, Rwanda, Tanzania, and Georgia. The analysis exploits unit-level price data collected by countries' national statistical offices for consumer price index calculation purposes. It applies the price differential methodology, which aims at estimating trade costs while accounting for the possibility of imperfect competition among intermediaries, controlling for spatial variation in markups. The findings show that the intra-national trade costs in the sample of countries are between 2.5 and 14 times larger than previous estimates for the United States using the same methodology.
Authors
- Disclosure Date
- 2024/06/03
- Disclosure Status
- Disclosed
- Doc Name
- Intra-national Trade Costs in Low- and Middle-Income Countries
- Originating Unit
- Off of Sr VP Dev Econ/Chief Econ (DECVP)
- Product Line
- Advisory Services & Analytics
- Published in
- United States of America
- Rel Proj ID
- 1W-Shrinking Economic Distance Phase II -- P500577
- Series Name
- Policy Research working paper ; no. WPS 10789; INFRASTRUCTURE;
- TF No/Name
- TF0C1998-Global : Shrinking Economic Distance (Relinking)
- Unit Owning
- ITRGK - Global Knowledge (ITRGK)
- Version Type
- Final
- Volume No
- 1
Table of Contents
- Introduction 4
- Data 6
- Price data 6
- Products' origin locations 6
- Distance between locations 9
- Methodological framework 9
- Theory 10
- Estimation strategy 11
- Estimates of intra-national trade costs 12
- Spatial price gaps 13
- Pass-through rates 13
- Estimates of trade costs using pass-through-adjusted price gaps and distance 16
- Discussion of results and robustness checks 19
- Robustness checks 20
- Comparison to previous literature 22
- Conclusion 23
- Appendix 25
- Data selection and processing 25
- Product lists 29
